Correlation Between Causeway International and Selected American
Can any of the company-specific risk be diversified away by investing in both Causeway International and Selected American 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 Selected American 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 Selected American Shares, you can compare the effects of market volatilities on Causeway International and Selected American 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 Selected American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway International and Selected American.
Diversification Opportunities for Causeway International and Selected American
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Causeway and Selected is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value and Selected American Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selected American Shares 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 Selected American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selected American Shares has no effect on the direction of Causeway International i.e., Causeway International and Selected American go up and down completely randomly.
Pair Corralation between Causeway International and Selected American
Assuming the 90 days horizon Causeway International Value is expected to under-perform the Selected American. But the mutual fund apears to be less risky and, when comparing its historical volatility, Causeway International Value is 1.27 times less risky than Selected American. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Selected American Shares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,327 in Selected American Shares on August 31, 2024 and sell it today you would earn a total of 135.00 from holding Selected American Shares or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Causeway International Value vs. Selected American Shares
Performance |
| Timeline |
| Causeway International |
| Selected American Shares |
Causeway International and Selected American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Causeway International and Selected American
The main advantage of trading using opposite Causeway International and Selected American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway International position performs unexpectedly, Selected American 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 Selected American will offset losses from the drop in Selected American's long position.The idea behind Causeway International Value and Selected American Shares 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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