Correlation Between Vanguard Emerging and Causeway Emerging

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

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

Diversification Opportunities for Vanguard Emerging and Causeway Emerging

0.97

Correlation Coefficient

Vanguard Emerging  Causeway Emerging

Almost no diversification

The 3 months correlation between Vanguard and Causeway is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets 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 Vanguard 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 Vanguard Emerging Markets 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 Vanguard Emerging i.e., Vanguard Emerging and Causeway Emerging go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Causeway Emerging

Assuming the 90 days horizon Vanguard Emerging is expected to generate 1.97 times less return on investment than Causeway Emerging. But when comparing it to its historical volatility, Vanguard Emerging Markets is 1.19 times less risky than Causeway Emerging. It trades about 0.16 of its potential returns per unit of risk. Causeway Emerging Markets is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,132  in Causeway Emerging Markets on May 4, 2025 and sell it today you would earn a total of  161.00  from holding Causeway Emerging Markets or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Vanguard Emerging Markets  vs.  Causeway Emerging Markets

Vanguard Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vanguard Emerging may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Causeway Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Causeway Emerging Markets are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Causeway Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Emerging and Causeway Emerging

The main advantage of trading using opposite Vanguard Emerging and Causeway Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Emerging 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 Vanguard Emerging Markets 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..