Correlation Between Causeway International and Aberdeen Select

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

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

Diversification Opportunities for Causeway International and Aberdeen Select

0.66

Correlation Coefficient

Causeway International  Aberdeen Select

Poor diversification

The 3 months correlation between Causeway and Aberdeen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value and Aberdeen Select International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Select Inte 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 Value are associated (or correlated) with Aberdeen Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Select Inte has no effect on the direction of Causeway International i.e., Causeway International and Aberdeen Select go up and down completely randomly.

Pair Corralation between Causeway International and Aberdeen Select

Assuming the 90 days horizon Causeway International Value is expected to under-perform the Aberdeen Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Causeway International Value is 1.28 times less risky than Aberdeen Select. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Aberdeen Select International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,924  in Aberdeen Select International on September 13, 2024 and sell it today you would earn a total of  113.00  from holding Aberdeen Select International or generate 3.86% return on investment over 90 days.

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

Causeway International Value  vs.  Aberdeen Select International

Causeway International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aberdeen Select Inte

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Select International are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aberdeen Select 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 International and Aberdeen Select

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

The idea behind Causeway International Value and Aberdeen Select International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.