Correlation Between Oakmark International and International Equity

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

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

Diversification Opportunities for Oakmark International and International Equity

0.83

Correlation Coefficient

Oakmark International  International Equity

Very poor diversification

The 3 months correlation between Oakmark and International is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and International Equity Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Oakmark 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 Oakmark International Fund are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Oakmark International i.e., Oakmark International and International Equity go up and down completely randomly.

Pair Corralation between Oakmark International and International Equity

Assuming the 90 days horizon Oakmark International Fund is expected to generate 1.4 times more return on investment than International Equity. However, Oakmark International is 1.4 times more volatile than International Equity Series. It trades about 0.01 of its potential returns per unit of risk. International Equity Series is currently generating about -0.03 per unit of risk. If you would invest  2,653  in Oakmark International Fund on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Oakmark International Fund or generate 0.11% return on investment over 90 days.

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

Oakmark International Fund  vs.  International Equity Series

Oakmark International

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Oakmark International and International Equity

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

The idea behind Oakmark International Fund and International Equity Series 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .