Correlation Between Smallcap Growth and Oakmark International

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

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

Diversification Opportunities for Smallcap Growth and Oakmark International

-0.52

Correlation Coefficient

Smallcap Growth  Oakmark International

Excellent diversification

The 3 months correlation between Smallcap and Oakmark is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Oakmark International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark International and Smallcap Growth 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 Smallcap Growth Fund 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 Smallcap Growth i.e., Smallcap Growth and Oakmark International go up and down completely randomly.

Pair Corralation between Smallcap Growth and Oakmark International

Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.07 times more return on investment than Oakmark International. However, Smallcap Growth is 1.07 times more volatile than Oakmark International Fund. It trades about 0.16 of its potential returns per unit of risk. Oakmark International Fund is currently generating about 0.03 per unit of risk. If you would invest  1,522  in Smallcap Growth Fund on September 12, 2024 and sell it today you would earn a total of  174.00  from holding Smallcap Growth Fund or generate 11.43% return on investment over 90 days.

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

Smallcap Growth Fund  vs.  Oakmark International Fund

Smallcap Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Growth Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly abnormal basic indicators, Smallcap Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oakmark International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark International Fund are ranked lower than 2 (%) 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.

Pair Trading with Smallcap Growth and Oakmark International

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.