Correlation Between Cullen Small and Maryland Tax

Can any of the company-specific risk be diversified away by investing in both Cullen Small and Maryland Tax 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 Small and Maryland Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cullen Small Cap and Maryland Tax Free Bond, you can compare the effects of market volatilities on Cullen Small and Maryland Tax 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 Small with a short position of Maryland Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen Small and Maryland Tax.

Diversification Opportunities for Cullen Small and Maryland Tax

0.59

Correlation Coefficient

Cullen Small  Maryland Tax

Very weak diversification

The 3 months correlation between Cullen and Maryland is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Small Cap and Maryland Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maryland Tax Free and Cullen Small 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 Small Cap are associated (or correlated) with Maryland Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maryland Tax Free has no effect on the direction of Cullen Small i.e., Cullen Small and Maryland Tax go up and down completely randomly.

Pair Corralation between Cullen Small and Maryland Tax

Assuming the 90 days horizon Cullen Small Cap is expected to under-perform the Maryland Tax. In addition to that, Cullen Small is 5.16 times more volatile than Maryland Tax Free Bond. It trades about -0.3 of its total potential returns per unit of risk. Maryland Tax Free Bond is currently generating about 0.18 per unit of volatility. If you would invest  1,007  in Maryland Tax Free Bond on December 2, 2024 and sell it today you would earn a total of  8.00  from holding Maryland Tax Free Bond or generate 0.79% return on investment over 90 days.

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

Cullen Small Cap  vs.  Maryland Tax Free Bond

Cullen Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cullen Small Cap 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 fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Maryland Tax Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maryland Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Maryland Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cullen Small and Maryland Tax

The main advantage of trading using opposite Cullen Small and Maryland Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen Small position performs unexpectedly, Maryland Tax 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 Maryland Tax will offset losses from the drop in Maryland Tax's long position.

The idea behind Cullen Small Cap and Maryland Tax Free Bond 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.