Correlation Between Oakmark International and Pzena International

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

Diversification Opportunities for Oakmark International and Pzena International

0.89

Correlation Coefficient

Oakmark International  Pzena International

Very poor diversification

The 3 months correlation between Oakmark and Pzena is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and Pzena International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena International Value 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 Pzena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena International Value has no effect on the direction of Oakmark International i.e., Oakmark International and Pzena International go up and down completely randomly.

Pair Corralation between Oakmark International and Pzena International

Assuming the 90 days horizon Oakmark International Fund is expected to under-perform the Pzena International. In addition to that, Oakmark International is 1.31 times more volatile than Pzena International Value. It trades about -0.03 of its total potential returns per unit of risk. Pzena International Value is currently generating about -0.02 per unit of volatility. If you would invest  1,112  in Pzena International Value on September 14, 2024 and sell it today you would lose (13.00) from holding Pzena International Value or give up 1.17% of portfolio value over 90 days.

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

Oakmark International Fund  vs.  Pzena International Value

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.

Pzena International Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pzena International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pzena International 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 Pzena International

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

The idea behind Oakmark International Fund and Pzena International Value 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.