Correlation Between Oakmark Fund and Oakmark Select

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

Diversification Opportunities for Oakmark Fund and Oakmark Select

0.92

Correlation Coefficient

Oakmark Fund  Oakmark Select

Almost no diversification

The 3 months correlation between Oakmark and Oakmark is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark Fund Advisor and Oakmark Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select and Oakmark Fund 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 Fund Advisor 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 Fund i.e., Oakmark Fund and Oakmark Select go up and down completely randomly.

Pair Corralation between Oakmark Fund and Oakmark Select

Assuming the 90 days horizon Oakmark Fund Advisor is expected to under-perform the Oakmark Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Oakmark Fund Advisor is 1.23 times less risky than Oakmark Select. The mutual fund trades about -0.34 of its potential returns per unit of risk. The Oakmark Select Fund is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  8,481  in Oakmark Select Fund on September 27, 2024 and sell it today you would lose (369.00) from holding Oakmark Select Fund or give up 4.35% of portfolio value over 90 days.

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

Oakmark Fund Advisor  vs.  Oakmark Select Fund

Oakmark Fund Advisor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Fund Advisor are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Oakmark Fund 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Oakmark Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oakmark Fund and Oakmark Select

The main advantage of trading using opposite Oakmark Fund and Oakmark Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oakmark Fund 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 Fund Advisor 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.