Correlation Between Causeway Emerging and Causeway International

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Can any of the company-specific risk be diversified away by investing in both Causeway Emerging 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 Causeway Emerging and Causeway International 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 Causeway International Small, you can compare the effects of market volatilities on Causeway Emerging 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 Causeway Emerging with a short position of Causeway International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Causeway Emerging and Causeway International.

Diversification Opportunities for Causeway Emerging and Causeway International

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Causeway and Causeway is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Causeway Emerging Markets and Causeway International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway International 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 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 Causeway Emerging i.e., Causeway Emerging and Causeway International go up and down completely randomly.

Pair Corralation between Causeway Emerging and Causeway International

Assuming the 90 days horizon Causeway Emerging Markets is expected to generate 1.34 times more return on investment than Causeway International. However, Causeway Emerging is 1.34 times more volatile than Causeway International Small. It trades about 0.06 of its potential returns per unit of risk. Causeway International Small is currently generating about 0.03 per unit of risk. If you would invest  1,132  in Causeway Emerging Markets on September 13, 2024 and sell it today you would earn a total of  40.00  from holding Causeway Emerging Markets or generate 3.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.44%
ValuesDaily Returns

Causeway Emerging Markets  vs.  Causeway International Small

 Performance 
       Timeline  
Causeway Emerging Markets 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Causeway Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Causeway Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Causeway International 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Causeway International Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Causeway International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Causeway Emerging and Causeway International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Causeway Emerging and Causeway International

The main advantage of trading using opposite Causeway Emerging and Causeway International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway Emerging 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.
The idea behind Causeway Emerging Markets and Causeway International Small 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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