Correlation Between Pear Tree and Oakmark International
Can any of the company-specific risk be diversified away by investing in both Pear Tree 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 Pear Tree and Oakmark International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pear Tree Polaris and Oakmark International Fund, you can compare the effects of market volatilities on Pear Tree 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 Pear Tree with a short position of Oakmark International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and Oakmark International.
Diversification Opportunities for Pear Tree and Oakmark International
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pear and Oakmark is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Oakmark International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark International and Pear Tree 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 Pear Tree Polaris 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 Pear Tree i.e., Pear Tree and Oakmark International go up and down completely randomly.
Pair Corralation between Pear Tree and Oakmark International
Assuming the 90 days horizon Pear Tree Polaris is expected to generate 0.78 times more return on investment than Oakmark International. However, Pear Tree Polaris is 1.28 times less risky than Oakmark International. It trades about 0.05 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 1,951 in Pear Tree Polaris on September 3, 2024 and sell it today you would earn a total of 413.00 from holding Pear Tree Polaris or generate 21.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pear Tree Polaris vs. Oakmark International Fund
Performance |
| Timeline |
| Pear Tree Polaris |
| Oakmark International |
Pear Tree and Oakmark International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pear Tree and Oakmark International
The main advantage of trading using opposite Pear Tree and Oakmark International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree 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.| Pear Tree vs. Oakmark International Fund | Pear Tree vs. Dodge International Stock | Pear Tree vs. Oakmark International Fund | Pear Tree vs. Oakmark International Fund |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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