Correlation Between Oakmark International and American Beacon

Can any of the company-specific risk be diversified away by investing in both Oakmark International and American Beacon 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 American Beacon 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 American Beacon International, you can compare the effects of market volatilities on Oakmark International and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oakmark International and American Beacon.

Diversification Opportunities for Oakmark International and American Beacon

0.96

Correlation Coefficient

Oakmark International  American Beacon

Almost no diversification

The 3 months correlation between Oakmark and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Fund and American Beacon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Inte 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Inte has no effect on the direction of Oakmark International i.e., Oakmark International and American Beacon go up and down completely randomly.

Pair Corralation between Oakmark International and American Beacon

Assuming the 90 days horizon Oakmark International is expected to generate 1.59 times less return on investment than American Beacon. In addition to that, Oakmark International is 1.25 times more volatile than American Beacon International. It trades about 0.19 of its total potential returns per unit of risk. American Beacon International is currently generating about 0.39 per unit of volatility. If you would invest  1,859  in American Beacon International on February 26, 2024 and sell it today you would earn a total of  95.00  from holding American Beacon International or generate 5.11% 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.  American Beacon International

Oakmark International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark International Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Oakmark International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Inte

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon International are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oakmark International and American Beacon

The main advantage of trading using opposite Oakmark International and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oakmark International position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.

The idea behind Oakmark International Fund and American Beacon International 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.