Correlation Between Small Cap and Oakmark International
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Oakmark International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and Oakmark International Fund, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Oakmark International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Oakmark International.
Diversification Opportunities for Small Cap and Oakmark International
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Small and Oakmark is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value 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 Small Cap 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 Small Cap Value 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 Small Cap i.e., Small Cap and Oakmark International go up and down completely randomly.
Pair Corralation between Small Cap and Oakmark International
Assuming the 90 days horizon Small Cap Value Fund is expected to generate 1.25 times more return on investment than Oakmark International. However, Small Cap is 1.25 times more volatile than Oakmark International Fund. It trades about 0.12 of its potential returns per unit of risk. Oakmark International Fund is currently generating about 0.11 per unit of risk. If you would invest 3,727 in Small Cap Value Fund on October 22, 2024 and sell it today you would earn a total of 83.00 from holding Small Cap Value Fund or generate 2.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Value Fund vs. Oakmark International Fund
Performance |
Timeline |
Small Cap Value |
Oakmark International |
Small Cap and Oakmark International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Oakmark International
The main advantage of trading using opposite Small Cap and Oakmark International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.Small Cap vs. Locorr Dynamic Equity | Small Cap vs. Qs Global Equity | Small Cap vs. T Rowe Price | Small Cap vs. Doubleline Core Fixed |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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