Correlation Between Cullen Value and Cullen Small

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

Diversification Opportunities for Cullen Value and Cullen Small

0.88

Correlation Coefficient

Cullen Value  Cullen Small

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 Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen Small Cap has no effect on the direction of Cullen Value i.e., Cullen Value and Cullen Small go up and down completely randomly.

Pair Corralation between Cullen Value and Cullen Small

Assuming the 90 days horizon Cullen Value Fund is expected to generate 0.59 times more return on investment than Cullen Small. However, Cullen Value Fund is 1.68 times less risky than Cullen Small. It trades about -0.1 of its potential returns per unit of risk. Cullen Small Cap is currently generating about -0.22 per unit of risk. If you would invest  1,462  in Cullen Value Fund on December 3, 2024 and sell it today you would lose (75.00) from holding Cullen Value Fund or give up 5.13% of portfolio value over 90 days.

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

Cullen Value Fund  vs.  Cullen Small Cap

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 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 basic 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.

Pair Trading with Cullen Value and Cullen Small

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

The idea behind Cullen Value Fund and Cullen Small Cap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .