Correlation Between Oakmark International and Oakmark Global

Can any of the company-specific risk be diversified away by investing in both Oakmark International and Oakmark Global 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 Oakmark Global 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 Oakmark Global Select, you can compare the effects of market volatilities on Oakmark International and Oakmark Global 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 Oakmark Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oakmark International and Oakmark Global.

Diversification Opportunities for Oakmark International and Oakmark Global

0.76

Correlation Coefficient

Oakmark International  Oakmark Global

Poor diversification

The 3 months correlation between Oakmark and Oakmark is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and Oakmark Global Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Global Select 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 Oakmark Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Global Select has no effect on the direction of Oakmark International i.e., Oakmark International and Oakmark Global go up and down completely randomly.

Pair Corralation between Oakmark International and Oakmark Global

Assuming the 90 days horizon Oakmark International Fund is expected to under-perform the Oakmark Global. In addition to that, Oakmark International is 1.6 times more volatile than Oakmark Global Select. It trades about -0.05 of its total potential returns per unit of risk. Oakmark Global Select is currently generating about -0.01 per unit of volatility. If you would invest  2,292  in Oakmark Global Select on September 17, 2024 and sell it today you would lose (16.00) from holding Oakmark Global Select or give up 0.7% of portfolio value over 90 days.

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

Oakmark International Fund  vs.  Oakmark Global Select

Oakmark International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oakmark International Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Oakmark Global Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oakmark Global Select has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Oakmark Global 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 Oakmark Global

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

The idea behind Oakmark International Fund and Oakmark Global Select 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.