Correlation Between International Equity and Oakmark International
Can any of the company-specific risk be diversified away by investing in both International Equity 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 International Equity and Oakmark International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Series and Oakmark International Fund, you can compare the effects of market volatilities on International Equity 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 International Equity with a short position of Oakmark International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Oakmark International.
Diversification Opportunities for International Equity and Oakmark International
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between International and Oakmark is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Series and Oakmark International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark International and International Equity 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 International Equity Series 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 International Equity i.e., International Equity and Oakmark International go up and down completely randomly.
Pair Corralation between International Equity and Oakmark International
Assuming the 90 days horizon International Equity Series is expected to generate 0.71 times more return on investment than Oakmark International. However, International Equity Series is 1.42 times less risky than Oakmark International. It trades about -0.01 of its potential returns per unit of risk. Oakmark International Fund is currently generating about -0.1 per unit of risk. If you would invest 1,257 in International Equity Series on September 3, 2024 and sell it today you would lose (3.00) from holding International Equity Series or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Series vs. Oakmark International Fund
Performance |
| Timeline |
| International Equity |
| Oakmark International |
International Equity and Oakmark International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Oakmark International
The main advantage of trading using opposite International Equity and Oakmark International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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 International Equity Series 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.
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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