Correlation Between Causeway International and Short-term Fund
Can any of the company-specific risk be diversified away by investing in both Causeway International and Short-term Fund 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 Short-term Fund 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 Short Term Fund Administrative, you can compare the effects of market volatilities on Causeway International and Short-term Fund 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 Short-term Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway International and Short-term Fund.
Diversification Opportunities for Causeway International and Short-term Fund
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Causeway and Short-term is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value and Short Term Fund Administrative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Causeway International i.e., Causeway International and Short-term Fund go up and down completely randomly.
Pair Corralation between Causeway International and Short-term Fund
Assuming the 90 days horizon Causeway International Value is expected to generate 8.73 times more return on investment than Short-term Fund. However, Causeway International is 8.73 times more volatile than Short Term Fund Administrative. It trades about 0.03 of its potential returns per unit of risk. Short Term Fund Administrative is currently generating about 0.26 per unit of risk. If you would invest 1,825 in Causeway International Value on August 26, 2024 and sell it today you would earn a total of 187.00 from holding Causeway International Value or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Causeway International Value vs. Short Term Fund Administrative
Performance |
| Timeline |
| Causeway International |
| Short Term Fund |
Causeway International and Short-term Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Causeway International and Short-term Fund
The main advantage of trading using opposite Causeway International and Short-term Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway International position performs unexpectedly, Short-term Fund 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 Short-term Fund will offset losses from the drop in Short-term Fund's long position.The idea behind Causeway International Value and Short Term Fund Administrative 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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