Correlation Between Cullen Value and Cullen Enhanced

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

By analyzing existing cross correlation between Cullen Value Fund and Cullen Enhanced Equity, you can compare the effects of market volatilities on Cullen Value and Cullen Enhanced 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 Value with a short position of Cullen Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen Value and Cullen Enhanced.

Diversification Opportunities for Cullen Value and Cullen Enhanced

0.88

Correlation Coefficient

Cullen Value  Cullen Enhanced

Very poor diversification

The 3 months correlation between Cullen and Cullen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Value Fund and Cullen Enhanced Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Enhanced Equity and Cullen Value 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 Value Fund are associated (or correlated) with Cullen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Enhanced Equity has no effect on the direction of Cullen Value i.e., Cullen Value and Cullen Enhanced go up and down completely randomly.

Pair Corralation between Cullen Value and Cullen Enhanced

Assuming the 90 days horizon Cullen Value Fund is expected to under-perform the Cullen Enhanced. In addition to that, Cullen Value is 1.2 times more volatile than Cullen Enhanced Equity. It trades about -0.1 of its total potential returns per unit of risk. Cullen Enhanced Equity is currently generating about -0.02 per unit of volatility. If you would invest  1,093  in Cullen Enhanced Equity on December 1, 2024 and sell it today you would lose (9.00) from holding Cullen Enhanced Equity or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Cullen Value Fund  vs.  Cullen Enhanced Equity

Cullen Value

Risk-Adjusted Performance

Very Weak

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

Cullen Enhanced Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cullen Enhanced Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Cullen Enhanced 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 Value and Cullen Enhanced

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

The idea behind Cullen Value Fund and Cullen Enhanced Equity 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.