Correlation Between Causeway Global and Causeway Emerging

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

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

Diversification Opportunities for Causeway Global and Causeway Emerging

0.49

Correlation Coefficient

Causeway Global  Causeway Emerging

Very weak diversification

The 3 months correlation between Causeway and Causeway is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Causeway Global Value and Causeway Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway Emerging Markets and Causeway Global 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 Global Value are associated (or correlated) with Causeway Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway Emerging Markets has no effect on the direction of Causeway Global i.e., Causeway Global and Causeway Emerging go up and down completely randomly.

Pair Corralation between Causeway Global and Causeway Emerging

Assuming the 90 days horizon Causeway Global Value is expected to under-perform the Causeway Emerging. In addition to that, Causeway Global is 2.71 times more volatile than Causeway Emerging Markets. It trades about -0.09 of its total potential returns per unit of risk. Causeway Emerging Markets is currently generating about -0.04 per unit of volatility. If you would invest  1,110  in Causeway Emerging Markets on December 4, 2024 and sell it today you would lose (29.00) from holding Causeway Emerging Markets or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Causeway Global Value  vs.  Causeway Emerging Markets

Causeway Global Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Causeway Global Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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.

Pair Trading with Causeway Global and Causeway Emerging

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

The idea behind Causeway Global Value and Causeway Emerging Markets 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 Global Correlations module to find global opportunities by holding instruments from different markets.