Correlation Between Oakmark International and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Oakmark International and Pear Tree 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 Pear Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oakmark International Small and Pear Tree Polaris, you can compare the effects of market volatilities on Oakmark International and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oakmark International and Pear Tree.
Diversification Opportunities for Oakmark International and Pear Tree
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oakmark and Pear is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Small and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Small are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Oakmark International i.e., Oakmark International and Pear Tree go up and down completely randomly.
Pair Corralation between Oakmark International and Pear Tree
Assuming the 90 days horizon Oakmark International Small is expected to under-perform the Pear Tree. In addition to that, Oakmark International is 1.0 times more volatile than Pear Tree Polaris. It trades about -0.44 of its total potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.25 per unit of volatility. If you would invest 1,616 in Pear Tree Polaris on August 27, 2024 and sell it today you would lose (63.00) from holding Pear Tree Polaris or give up 3.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oakmark International Small vs. Pear Tree Polaris
Performance |
| Timeline |
| Oakmark International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Pear Tree Polaris |
Oakmark International and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oakmark International and Pear Tree
The main advantage of trading using opposite Oakmark International and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oakmark International position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.The idea behind Oakmark International Small and Pear Tree Polaris 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.
| Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Artisan International Value | Pear Tree vs. Rondure New World |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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