Correlation Between Oakmark International and Brandes International

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

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

Diversification Opportunities for Oakmark International and Brandes International

0.9

Correlation Coefficient

Oakmark International  Brandes International

Almost no diversification

The 3 months correlation between Oakmark and Brandes is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and Brandes International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes International 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 Fund are associated (or correlated) with Brandes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes International has no effect on the direction of Oakmark International i.e., Oakmark International and Brandes International go up and down completely randomly.

Pair Corralation between Oakmark International and Brandes International

Assuming the 90 days horizon Oakmark International Fund is expected to generate 1.55 times more return on investment than Brandes International. However, Oakmark International is 1.55 times more volatile than Brandes International Equity. It trades about 0.02 of its potential returns per unit of risk. Brandes International Equity is currently generating about -0.05 per unit of risk. If you would invest  2,633  in Oakmark International Fund on September 12, 2024 and sell it today you would earn a total of  25.00  from holding Oakmark International Fund or generate 0.95% return on investment over 90 days.

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

Oakmark International Fund  vs.  Brandes International Equity

Oakmark International

Risk-Adjusted Performance

1 of 100

Weak

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

Brandes International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Oakmark International Fund and Brandes International Equity 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.