Correlation Between Oakmark International and Oakmark Select

Can any of the company-specific risk be diversified away by investing in both Oakmark International 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 Oakmark International and Oakmark Select 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 Oakmark Select, you can compare the effects of market volatilities on Oakmark International 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 Oakmark International with a short position of Oakmark Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oakmark International and Oakmark Select.

Diversification Opportunities for Oakmark International and Oakmark Select

-0.76

Correlation Coefficient

Oakmark International  Oakmark Select

Pay attention - limited upside

The 3 months correlation between Oakmark and Oakmark is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and Oakmark Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select 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 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 Oakmark International i.e., Oakmark International and Oakmark Select go up and down completely randomly.

Pair Corralation between Oakmark International and Oakmark Select

Assuming the 90 days horizon Oakmark International is expected to generate 4.74 times less return on investment than Oakmark Select. But when comparing it to its historical volatility, Oakmark International Fund is 1.08 times less risky than Oakmark Select. It trades about 0.02 of its potential returns per unit of risk. Oakmark Select is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,921  in Oakmark Select on September 24, 2024 and sell it today you would earn a total of  3,092  from holding Oakmark Select or generate 62.83% return on investment over 90 days.

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

Oakmark International Fund  vs.  Oakmark Select

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 latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Oakmark Select

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select are ranked lower than 7 (%) 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.

Pair Trading with Oakmark International and Oakmark Select

The main advantage of trading using opposite Oakmark International and Oakmark Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oakmark International 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 Oakmark International Fund and Oakmark Select 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.