Correlation Between Oakmark International and Driehaus Emerging

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

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

Diversification Opportunities for Oakmark International and Driehaus Emerging

0.83

Correlation Coefficient

Oakmark International  Driehaus Emerging

Very poor diversification

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

Pair Corralation between Oakmark International and Driehaus Emerging

Assuming the 90 days horizon Oakmark International Small is expected to under-perform the Driehaus Emerging. In addition to that, Oakmark International is 2.73 times more volatile than Driehaus Emerging Markets. It trades about -0.12 of its total potential returns per unit of risk. Driehaus Emerging Markets is currently generating about 0.17 per unit of volatility. If you would invest  3,729  in Driehaus Emerging Markets on September 14, 2024 and sell it today you would earn a total of  80.00  from holding Driehaus Emerging Markets or generate 2.15% return on investment over 90 days.

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

Oakmark International Small  vs.  Driehaus Emerging Markets

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Driehaus Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Oakmark International Small and Driehaus Emerging Markets 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.