Correlation Between Oakmark Select and Oakmark Fund

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

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

Diversification Opportunities for Oakmark Select and Oakmark Fund

0.83

Correlation Coefficient

Oakmark Select  Oakmark Fund

Very poor diversification

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

Pair Corralation between Oakmark Select and Oakmark Fund

Assuming the 90 days horizon Oakmark Select is expected to generate 1.22 times more return on investment than Oakmark Fund. However, Oakmark Select is 1.22 times more volatile than Oakmark Fund Advisor. It trades about -0.29 of its potential returns per unit of risk. Oakmark Fund Advisor is currently generating about -0.37 per unit of risk. If you would invest  8,494  in Oakmark Select on September 26, 2024 and sell it today you would lose (481.00) from holding Oakmark Select or give up 5.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Oakmark Select  vs.  Oakmark Fund Advisor

Oakmark Select

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select are ranked lower than 8 (%) 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.

Oakmark Fund Advisor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Fund Advisor are ranked lower than 4 (%) 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.

Pair Trading with Oakmark Select and Oakmark Fund

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

The idea behind Oakmark Select and Oakmark Fund Advisor 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.

Check out your portfolio center.

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.