Correlation Between American Funds and Causeway International
Can any of the company-specific risk be diversified away by investing in both American Funds and Causeway 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 American Funds and Causeway International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Causeway International Opportunities, you can compare the effects of market volatilities on American Funds and Causeway 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 American Funds with a short position of Causeway International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Causeway International.
Diversification Opportunities for American Funds and Causeway International
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Causeway is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Causeway International Opportu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway International and American Funds 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 American Funds Retirement are associated (or correlated) with Causeway International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway International has no effect on the direction of American Funds i.e., American Funds and Causeway International go up and down completely randomly.
Pair Corralation between American Funds and Causeway International
Assuming the 90 days horizon American Funds is expected to generate 1.18 times less return on investment than Causeway International. But when comparing it to its historical volatility, American Funds Retirement is 1.97 times less risky than Causeway International. It trades about 0.17 of its potential returns per unit of risk. Causeway International Opportunities is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,546 in Causeway International Opportunities on October 25, 2024 and sell it today you would earn a total of 24.00 from holding Causeway International Opportunities or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Causeway International Opportu
Performance |
| Timeline |
| American Funds Retirement |
| Causeway International |
American Funds and Causeway International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Causeway International
The main advantage of trading using opposite American Funds and Causeway International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Causeway 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 Causeway International will offset losses from the drop in Causeway International's long position.| American Funds vs. Lord Abbett Diversified | American Funds vs. T Rowe Price | American Funds vs. Tax Managed Mid Small | American Funds vs. Wells Fargo Diversified |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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