Correlation Between Causeway Emerging and Causeway International
Can any of the company-specific risk be diversified away by investing in both Causeway Emerging and Causeway 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 Causeway Emerging and Causeway International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Causeway Emerging Markets and Causeway International Small, you can compare the effects of market volatilities on Causeway Emerging and Causeway 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 Causeway Emerging with a short position of Causeway International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway Emerging and Causeway International.
Diversification Opportunities for Causeway Emerging and Causeway International
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Causeway and CAUSEWAY is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Causeway Emerging Markets and Causeway International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway International and Causeway Emerging 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 Causeway Emerging Markets are associated (or correlated) with Causeway International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway International has no effect on the direction of Causeway Emerging i.e., Causeway Emerging and Causeway International go up and down completely randomly.
Pair Corralation between Causeway Emerging and Causeway International
Assuming the 90 days horizon Causeway Emerging Markets is expected to under-perform the Causeway International. In addition to that, Causeway Emerging is 1.39 times more volatile than Causeway International Small. It trades about -0.18 of its total potential returns per unit of risk. Causeway International Small is currently generating about -0.08 per unit of volatility. If you would invest 1,518 in Causeway International Small on August 30, 2024 and sell it today you would lose (18.00) from holding Causeway International Small or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Causeway Emerging Markets vs. Causeway International Small
Performance |
| Timeline |
| Causeway Emerging Markets |
| Causeway International |
Causeway Emerging and Causeway International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Causeway Emerging and Causeway International
The main advantage of trading using opposite Causeway Emerging and Causeway International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway Emerging position performs unexpectedly, Causeway 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 Causeway International will offset losses from the drop in Causeway International's long position.| Causeway Emerging vs. Vanguard Emerging Markets | Causeway Emerging vs. Vanguard Emerging Markets | Causeway Emerging vs. HUMANA INC | Causeway Emerging vs. Aquagold International |
| Causeway International vs. Small Cap Stock | Causeway International vs. T Rowe Price | Causeway International vs. Vanguard Strategic Small Cap | Causeway International vs. Delaware Limited Term Diversified |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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