My company is analyzing a new long/short equity index trade using PCA to model the values of various equity indexes around the world. Question: what are the implications of NOT converting all historic prices into the same currency (US dollar of course) to measure the basket and create the price models for the various indexes? My partner believes that the somewhat difficult process of converting prices into the same currency adds zero extra benefit. I argued that you can't possibly measure the currency exchange risk UNLESS you convert all historic prices to the same measuring stick (US dollars). Ideas? Thoughts? Anyone else gone through this?