Correlation Between Oppenheimer International and Smallcap World

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

By analyzing existing cross correlation between Oppenheimer International Diversified and Smallcap World Fund, you can compare the effects of market volatilities on Oppenheimer International and Smallcap World 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 Oppenheimer International with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oppenheimer International and Smallcap World.

Diversification Opportunities for Oppenheimer International and Smallcap World

0.69

Correlation Coefficient

Oppenheimer International  Smallcap World

Poor diversification

The 3 months correlation between Oppenheimer and Smallcap is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Oppenheimer International Dive and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Oppenheimer 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 Oppenheimer International Diversified are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Oppenheimer International i.e., Oppenheimer International and Smallcap World go up and down completely randomly.

Pair Corralation between Oppenheimer International and Smallcap World

Assuming the 90 days horizon Oppenheimer International Diversified is expected to generate 0.98 times more return on investment than Smallcap World. However, Oppenheimer International Diversified is 1.02 times less risky than Smallcap World. It trades about -0.06 of its potential returns per unit of risk. Smallcap World Fund is currently generating about -0.15 per unit of risk. If you would invest  1,608  in Oppenheimer International Diversified on December 1, 2024 and sell it today you would lose (53.00) from holding Oppenheimer International Diversified or give up 3.3% of portfolio value over 90 days.

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

Oppenheimer International Dive  vs.  Smallcap World Fund

Oppenheimer International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oppenheimer International Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Oppenheimer International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smallcap World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap World Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Oppenheimer International and Smallcap World

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

The idea behind Oppenheimer International Diversified and Smallcap World 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.