Correlation Between Cullen High and The Midcap

Can any of the company-specific risk be diversified away by investing in both Cullen High and The Midcap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cullen High and The Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cullen High Dividend and The Midcap Growth, you can compare the effects of market volatilities on Cullen High and The Midcap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cullen High with a short position of The Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen High and The Midcap.

Diversification Opportunities for Cullen High and The Midcap

0.61

Correlation Coefficient

Cullen High  The Midcap

Poor diversification

The 3 months correlation between Cullen and The is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cullen High Dividend and The Midcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Cullen High is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cullen High Dividend are associated (or correlated) with The Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Cullen High i.e., Cullen High and The Midcap go up and down completely randomly.

Pair Corralation between Cullen High and The Midcap

Assuming the 90 days horizon Cullen High Dividend is expected to generate 0.43 times more return on investment than The Midcap. However, Cullen High Dividend is 2.34 times less risky than The Midcap. It trades about -0.01 of its potential returns per unit of risk. The Midcap Growth is currently generating about -0.16 per unit of risk. If you would invest  1,350  in Cullen High Dividend on November 29, 2024 and sell it today you would lose (9.00) from holding Cullen High Dividend or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cullen High Dividend  vs.  The Midcap Growth

Cullen High Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cullen High Dividend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Cullen High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Midcap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Midcap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cullen High and The Midcap

The main advantage of trading using opposite Cullen High and The Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen High position performs unexpectedly, The Midcap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in The Midcap will offset losses from the drop in The Midcap's long position.

The idea behind Cullen High Dividend and The Midcap Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.