Correlation Between Total Return and Oakmark Bond

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

By analyzing existing cross correlation between Total Return Fund and Oakmark Bond, you can compare the effects of market volatilities on Total Return and Oakmark Bond 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 Total Return with a short position of Oakmark Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Oakmark Bond.

Diversification Opportunities for Total Return and Oakmark Bond

0.99

Correlation Coefficient

Total Return  Oakmark Bond

No risk reduction

The 3 months correlation between Total and Oakmark is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Oakmark Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Bond and Total Return 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 Total Return Fund are associated (or correlated) with Oakmark Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Bond has no effect on the direction of Total Return i.e., Total Return and Oakmark Bond go up and down completely randomly.

Pair Corralation between Total Return and Oakmark Bond

Assuming the 90 days horizon Total Return Fund is expected to under-perform the Oakmark Bond. In addition to that, Total Return is 1.07 times more volatile than Oakmark Bond. It trades about -0.11 of its total potential returns per unit of risk. Oakmark Bond is currently generating about -0.1 per unit of volatility. If you would invest  913.00  in Oakmark Bond on September 13, 2024 and sell it today you would lose (16.00) from holding Oakmark Bond or give up 1.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Total Return Fund  vs.  Oakmark Bond

Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Oakmark Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Total Return and Oakmark Bond

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

The idea behind Total Return Fund and Oakmark Bond 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.