Correlation Between Palm Valley and Cullen International

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

By analyzing existing cross correlation between Palm Valley Capital and Cullen International High, you can compare the effects of market volatilities on Palm Valley and Cullen International 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 Palm Valley with a short position of Cullen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palm Valley and Cullen International.

Diversification Opportunities for Palm Valley and Cullen International

-0.14

Correlation Coefficient

Palm Valley  Cullen International

Good diversification

The 3 months correlation between Palm and Cullen is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Palm Valley Capital and Cullen International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen International High and Palm Valley 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 Palm Valley Capital are associated (or correlated) with Cullen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen International High has no effect on the direction of Palm Valley i.e., Palm Valley and Cullen International go up and down completely randomly.

Pair Corralation between Palm Valley and Cullen International

Assuming the 90 days horizon Palm Valley Capital is expected to generate 0.24 times more return on investment than Cullen International. However, Palm Valley Capital is 4.14 times less risky than Cullen International. It trades about 0.13 of its potential returns per unit of risk. Cullen International High is currently generating about -0.08 per unit of risk. If you would invest  1,295  in Palm Valley Capital on September 12, 2024 and sell it today you would earn a total of  16.00  from holding Palm Valley Capital or generate 1.24% return on investment over 90 days.

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

Palm Valley Capital  vs.  Cullen International High

Palm Valley Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palm Valley Capital are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Palm Valley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cullen International High

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Palm Valley and Cullen International

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

The idea behind Palm Valley Capital and Cullen International High 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..