Correlation Between Causeway International and Cullen International
Can any of the company-specific risk be diversified away by investing in both Causeway International 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 Causeway International and Cullen International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Causeway International Value and Cullen International High, you can compare the effects of market volatilities on Causeway International 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 Causeway International with a short position of Cullen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway International and Cullen International.
Diversification Opportunities for Causeway International and Cullen International
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Causeway and Cullen is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value 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 Causeway International 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 International Value 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 Causeway International i.e., Causeway International and Cullen International go up and down completely randomly.
Pair Corralation between Causeway International and Cullen International
Assuming the 90 days horizon Causeway International Value is expected to generate 1.18 times more return on investment than Cullen International. However, Causeway International is 1.18 times more volatile than Cullen International High. It trades about 0.05 of its potential returns per unit of risk. Cullen International High is currently generating about -0.04 per unit of risk. If you would invest 2,063 in Causeway International Value on September 12, 2024 and sell it today you would earn a total of 16.00 from holding Causeway International Value or generate 0.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Causeway International Value vs. Cullen International High
Performance |
| Timeline |
| Causeway International |
| Cullen International High |
Causeway International and Cullen International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Causeway International and Cullen International
The main advantage of trading using opposite Causeway International and Cullen International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway International 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 Causeway International Value 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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