Correlation Between Causeway International and International Equity
Can any of the company-specific risk be diversified away by investing in both Causeway International and International Equity 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 International Equity 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 International Equity Portfolio, you can compare the effects of market volatilities on Causeway International and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway International and International Equity.
Diversification Opportunities for Causeway International and International Equity
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Causeway and International is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value and International Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Causeway International i.e., Causeway International and International Equity go up and down completely randomly.
Pair Corralation between Causeway International and International Equity
Assuming the 90 days horizon Causeway International Value is expected to generate 0.86 times more return on investment than International Equity. However, Causeway International Value is 1.16 times less risky than International Equity. It trades about -0.25 of its potential returns per unit of risk. International Equity Portfolio is currently generating about -0.26 per unit of risk. If you would invest 2,184 in Causeway International Value on August 29, 2024 and sell it today you would lose (167.00) from holding Causeway International Value or give up 7.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Causeway International Value vs. International Equity Portfolio
Performance |
| Timeline |
| Causeway International |
| International Equity |
Causeway International and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Causeway International and International Equity
The main advantage of trading using opposite Causeway International and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway International position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Causeway International vs. HUMANA INC | Causeway International vs. Aquagold International | Causeway International vs. Barloworld Ltd ADR | Causeway International vs. Morningstar Unconstrained Allocation |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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