Correlation Between Morningstar Municipal and Oakmark Select

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

By analyzing existing cross correlation between Morningstar Municipal Bond and Oakmark Select Fund, you can compare the effects of market volatilities on Morningstar Municipal and Oakmark 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 Morningstar Municipal with a short position of Oakmark Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Municipal and Oakmark Select.

Diversification Opportunities for Morningstar Municipal and Oakmark Select

0.17

Correlation Coefficient

Morningstar Municipal  Oakmark Select

Average diversification

The 3 months correlation between Morningstar and Oakmark is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Municipal Bond and Oakmark Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select and Morningstar Municipal 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 Morningstar Municipal Bond are associated (or correlated) with Oakmark Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Select has no effect on the direction of Morningstar Municipal i.e., Morningstar Municipal and Oakmark Select go up and down completely randomly.

Pair Corralation between Morningstar Municipal and Oakmark Select

Assuming the 90 days horizon Morningstar Municipal is expected to generate 42.92 times less return on investment than Oakmark Select. But when comparing it to its historical volatility, Morningstar Municipal Bond is 4.37 times less risky than Oakmark Select. It trades about 0.02 of its potential returns per unit of risk. Oakmark Select Fund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  7,371  in Oakmark Select Fund on September 14, 2024 and sell it today you would earn a total of  1,024  from holding Oakmark Select Fund or generate 13.89% return on investment over 90 days.

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

Morningstar Municipal Bond  vs.  Oakmark Select Fund

Morningstar Municipal

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Municipal Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oakmark Select

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Oakmark Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morningstar Municipal and Oakmark Select

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

The idea behind Morningstar Municipal Bond and Oakmark Select Fund 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..