Correlation Between Cullen Enhanced and Cullen Small

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

Diversification Opportunities for Cullen Enhanced and Cullen Small

0.14

Correlation Coefficient

Cullen Enhanced  Cullen Small

Average diversification

The 3 months correlation between Cullen and Cullen is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Enhanced Equity 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 Enhanced 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 Enhanced Equity 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 Enhanced i.e., Cullen Enhanced and Cullen Small go up and down completely randomly.

Pair Corralation between Cullen Enhanced and Cullen Small

Assuming the 90 days horizon Cullen Enhanced Equity is expected to generate 0.46 times more return on investment than Cullen Small. However, Cullen Enhanced Equity is 2.17 times less risky than Cullen Small. It trades about 0.0 of its potential returns per unit of risk. Cullen Small Cap is currently generating about -0.25 per unit of risk. If you would invest  1,071  in Cullen Enhanced Equity on December 4, 2024 and sell it today you would earn a total of  0.00  from holding Cullen Enhanced Equity or generate 0.0% return on investment over 90 days.

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

Cullen Enhanced Equity  vs.  Cullen Small Cap

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.

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.

Pair Trading with Cullen Enhanced and Cullen Small

The main advantage of trading using opposite Cullen Enhanced and Cullen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen Enhanced 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 Enhanced Equity 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.