Correlation Between Emerging Markets and Oakmark International

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

By analyzing existing cross correlation between Emerging Markets Portfolio and Oakmark International Small, you can compare the effects of market volatilities on Emerging Markets and Oakmark 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 Emerging Markets with a short position of Oakmark International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Oakmark International.

Diversification Opportunities for Emerging Markets and Oakmark International

0.59

Correlation Coefficient

Emerging Markets  Oakmark International

Very weak diversification

The 3 months correlation between Emerging and Oakmark is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Portfolio and Oakmark International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark International and Emerging Markets 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 Emerging Markets Portfolio are associated (or correlated) with Oakmark International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark International has no effect on the direction of Emerging Markets i.e., Emerging Markets and Oakmark International go up and down completely randomly.

Pair Corralation between Emerging Markets and Oakmark International

Assuming the 90 days horizon Emerging Markets Portfolio is expected to under-perform the Oakmark International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Emerging Markets Portfolio is 1.13 times less risky than Oakmark International. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Oakmark International Small is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,011  in Oakmark International Small on September 5, 2024 and sell it today you would lose (25.00) from holding Oakmark International Small or give up 1.24% of portfolio value over 90 days.

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

Emerging Markets Portfolio  vs.  Oakmark International Small

Emerging Markets Por

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Portfolio are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Emerging Markets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oakmark International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oakmark International Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Oakmark 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 Emerging Markets and Oakmark International

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

The idea behind Emerging Markets Portfolio and Oakmark International Small 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.