Correlation Between Cullen Value and Cullen Emerging

Can any of the company-specific risk be diversified away by investing in both Cullen Value and Cullen Emerging 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 Emerging 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 Emerging Markets, you can compare the effects of market volatilities on Cullen Value and Cullen Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen Value and Cullen Emerging.

Diversification Opportunities for Cullen Value and Cullen Emerging

-0.12

Correlation Coefficient

Cullen Value  Cullen Emerging

Good diversification

The 3 months correlation between Cullen and Cullen is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Value Fund and Cullen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Emerging Markets 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Emerging Markets has no effect on the direction of Cullen Value i.e., Cullen Value and Cullen Emerging go up and down completely randomly.

Pair Corralation between Cullen Value and Cullen Emerging

Assuming the 90 days horizon Cullen Value is expected to generate 5.98 times less return on investment than Cullen Emerging. But when comparing it to its historical volatility, Cullen Value Fund is 1.13 times less risky than Cullen Emerging. It trades about 0.01 of its potential returns per unit of risk. Cullen Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,224  in Cullen Emerging Markets on December 29, 2024 and sell it today you would earn a total of  39.00  from holding Cullen Emerging Markets or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Cullen Value Fund  vs.  Cullen Emerging Markets

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 basic 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 Emerging Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cullen Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cullen Emerging 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 Emerging

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

The idea behind Cullen Value Fund and Cullen Emerging Markets 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.