Correlation Between Causeway Emerging and Harding Loevner

Can any of the company-specific risk be diversified away by investing in both Causeway Emerging and Harding Loevner 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 Emerging and Harding Loevner into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Causeway Emerging Markets and Harding Loevner Institutional, you can compare the effects of market volatilities on Causeway Emerging and Harding Loevner 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 Emerging with a short position of Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway Emerging and Harding Loevner.

Diversification Opportunities for Causeway Emerging and Harding Loevner

0.63

Correlation Coefficient

Causeway Emerging  Harding Loevner

Poor diversification

The 3 months correlation between Causeway and Harding is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Causeway Emerging Markets and Harding Loevner Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Inst and Causeway Emerging 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 Emerging Markets are associated (or correlated) with Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Inst has no effect on the direction of Causeway Emerging i.e., Causeway Emerging and Harding Loevner go up and down completely randomly.

Pair Corralation between Causeway Emerging and Harding Loevner

Assuming the 90 days horizon Causeway Emerging Markets is expected to generate 0.57 times more return on investment than Harding Loevner. However, Causeway Emerging Markets is 1.74 times less risky than Harding Loevner. It trades about -0.02 of its potential returns per unit of risk. Harding Loevner Institutional is currently generating about -0.12 per unit of risk. If you would invest  1,096  in Causeway Emerging Markets on December 2, 2024 and sell it today you would lose (15.00) from holding Causeway Emerging Markets or give up 1.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Causeway Emerging Markets  vs.  Harding Loevner Institutional

Causeway Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Causeway Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Causeway Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harding Loevner Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harding Loevner Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Causeway Emerging and Harding Loevner

The main advantage of trading using opposite Causeway Emerging and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway Emerging position performs unexpectedly, Harding Loevner 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 Harding Loevner will offset losses from the drop in Harding Loevner's long position.

The idea behind Causeway Emerging Markets and Harding Loevner Institutional 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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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.