Correlation Between Vanguard International and Oakmark International

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

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

Diversification Opportunities for Vanguard International and Oakmark International

0.51

Correlation Coefficient

Vanguard International  Oakmark International

Very weak diversification

The 3 months correlation between Vanguard and Oakmark is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Value and Oakmark International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark International and Vanguard 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 Vanguard International Value 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 Vanguard International i.e., Vanguard International and Oakmark International go up and down completely randomly.

Pair Corralation between Vanguard International and Oakmark International

Assuming the 90 days horizon Vanguard International is expected to generate 1.05 times less return on investment than Oakmark International. But when comparing it to its historical volatility, Vanguard International Value is 1.13 times less risky than Oakmark International. It trades about 0.03 of its potential returns per unit of risk. Oakmark International Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,387  in Oakmark International Fund on December 2, 2024 and sell it today you would earn a total of  332.00  from holding Oakmark International Fund or generate 13.91% return on investment over 90 days.

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

Vanguard International Value  vs.  Oakmark International Fund

Vanguard International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard International 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark International Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oakmark International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard International and Oakmark International

The main advantage of trading using opposite Vanguard International and Oakmark International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International 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 Vanguard International Value and Oakmark International 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.

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.