Correlation Between Causeway International and Causeway Global

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

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

Diversification Opportunities for Causeway International and Causeway Global

0.96

Correlation Coefficient

Causeway International  Causeway Global

Almost no diversification

The 3 months correlation between Causeway and Causeway is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Small and Causeway Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway Global Value 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 Small are associated (or correlated) with Causeway Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway Global Value has no effect on the direction of Causeway International i.e., Causeway International and Causeway Global go up and down completely randomly.

Pair Corralation between Causeway International and Causeway Global

Assuming the 90 days horizon Causeway International Small is expected to generate 0.41 times more return on investment than Causeway Global. However, Causeway International Small is 2.47 times less risky than Causeway Global. It trades about -0.11 of its potential returns per unit of risk. Causeway Global Value is currently generating about -0.08 per unit of risk. If you would invest  1,468  in Causeway International Small on December 3, 2024 and sell it today you would lose (96.00) from holding Causeway International Small or give up 6.54% of portfolio value over 90 days.

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

Causeway International Small  vs.  Causeway Global Value

Causeway International

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Causeway International and Causeway Global

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

The idea behind Causeway International Small and Causeway Global Value 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.