Correlation Between Selected American and Causeway International

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

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

Diversification Opportunities for Selected American and Causeway International

0.61

Correlation Coefficient

Selected American  Causeway International

Poor diversification

The 3 months correlation between Selected and Causeway is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Selected American Shares and Causeway International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway International and Selected American 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 Selected American Shares 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 Selected American i.e., Selected American and Causeway International go up and down completely randomly.

Pair Corralation between Selected American and Causeway International

Assuming the 90 days horizon Selected American Shares is expected to under-perform the Causeway International. In addition to that, Selected American is 1.37 times more volatile than Causeway International Value. It trades about -0.13 of its total potential returns per unit of risk. Causeway International Value is currently generating about 0.02 per unit of volatility. If you would invest  2,037  in Causeway International Value on December 5, 2024 and sell it today you would earn a total of  27.00  from holding Causeway International Value or generate 1.33% return on investment over 90 days.

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

Selected American Shares  vs.  Causeway International Value

Selected American Shares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selected American Shares 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 basic 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 International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Causeway International Value are ranked lower than 1 (%) 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.

Pair Trading with Selected American and Causeway International

The main advantage of trading using opposite Selected American and Causeway International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selected American 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 Selected American Shares and Causeway International 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.