Correlation Between Oakmark International and Free Market
Can any of the company-specific risk be diversified away by investing in both Oakmark International and Free Market 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 Free Market 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 Free Market International, you can compare the effects of market volatilities on Oakmark International and Free Market 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 Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oakmark International and Free Market.
Diversification Opportunities for Oakmark International and Free Market
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Oakmark and Free is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and Free Market International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market 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 Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market International has no effect on the direction of Oakmark International i.e., Oakmark International and Free Market go up and down completely randomly.
Pair Corralation between Oakmark International and Free Market
Assuming the 90 days horizon Oakmark International is expected to generate 4.0 times less return on investment than Free Market. In addition to that, Oakmark International is 1.19 times more volatile than Free Market International. It trades about 0.01 of its total potential returns per unit of risk. Free Market International is currently generating about 0.07 per unit of volatility. If you would invest 1,031 in Free Market International on September 12, 2024 and sell it today you would earn a total of 184.00 from holding Free Market International or generate 17.85% 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. Free Market International
Performance |
| Timeline |
| Oakmark International |
| Free Market International |
Oakmark International and Free Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oakmark International and Free Market
The main advantage of trading using opposite Oakmark International and Free Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oakmark International position performs unexpectedly, Free Market 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 Free Market will offset losses from the drop in Free Market's long position.| Oakmark International vs. Oakmark Fund Investor | Oakmark International vs. Oakmark Select Fund | Oakmark International vs. Oakmark International Small | Oakmark International vs. Oakmark Global Fund |
| Free Market vs. Oakmark International Fund | Free Market vs. Oakmark Global Fund | Free Market vs. Oakmark Select Fund | Free Market vs. Oakmark Global Select |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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