Correlation Between Oakmark Select and Wells Fargo

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

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

Diversification Opportunities for Oakmark Select and Wells Fargo

0.0

Correlation Coefficient

Oakmark Select  Wells Fargo

Pay attention - limited upside

The 3 months correlation between Oakmark and Wells is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark Select Fund and Wells Fargo Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Funds and Oakmark Select 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 Select Fund are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Funds has no effect on the direction of Oakmark Select i.e., Oakmark Select and Wells Fargo go up and down completely randomly.

Pair Corralation between Oakmark Select and Wells Fargo

Assuming the 90 days horizon Oakmark Select Fund is expected to generate 3.34 times more return on investment than Wells Fargo. However, Oakmark Select is 3.34 times more volatile than Wells Fargo Funds. It trades about 0.08 of its potential returns per unit of risk. Wells Fargo Funds is currently generating about 0.07 per unit of risk. If you would invest  5,980  in Oakmark Select Fund on October 12, 2024 and sell it today you would earn a total of  2,003  from holding Oakmark Select Fund or generate 33.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.74%
Values	Daily Returns

Oakmark Select Fund  vs.  Wells Fargo Funds

Oakmark Select

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Oakmark Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wells Fargo 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 Select and Wells Fargo

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

The idea behind Oakmark Select Fund and Wells Fargo Funds 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.