Correlation Between Causeway International and Europacific Growth
Can any of the company-specific risk be diversified away by investing in both Causeway International and Europacific Growth 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 Europacific Growth 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 Europacific Growth Fund, you can compare the effects of market volatilities on Causeway International and Europacific Growth 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 Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway International and Europacific Growth.
Diversification Opportunities for Causeway International and Europacific Growth
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Causeway and Europacific is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth 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 Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of Causeway International i.e., Causeway International and Europacific Growth go up and down completely randomly.
Pair Corralation between Causeway International and Europacific Growth
Assuming the 90 days horizon Causeway International Value is expected to generate 1.03 times more return on investment than Europacific Growth. However, Causeway International is 1.03 times more volatile than Europacific Growth Fund. It trades about 0.06 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about 0.04 per unit of risk. If you would invest 1,563 in Causeway International Value on August 26, 2024 and sell it today you would earn a total of 449.00 from holding Causeway International Value or generate 28.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Causeway International Value vs. Europacific Growth Fund
Performance |
| Timeline |
| Causeway International |
| Europacific Growth |
Causeway International and Europacific Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Causeway International and Europacific Growth
The main advantage of trading using opposite Causeway International and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway International position performs unexpectedly, Europacific Growth 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 Europacific Growth will offset losses from the drop in Europacific Growth's long position.The idea behind Causeway International Value and Europacific Growth Fund 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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