Correlation Between Oakmark International and Avantis International

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

Diversification Opportunities for Oakmark International and Avantis International

0.59

Correlation Coefficient

Oakmark International  Avantis International

Very weak diversification

The 3 months correlation between Oakmark and Avantis is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Oakmark International Small and Avantis International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis 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 Small are associated (or correlated) with Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Oakmark International i.e., Oakmark International and Avantis International go up and down completely randomly.

Pair Corralation between Oakmark International and Avantis International

Assuming the 90 days horizon Oakmark International is expected to generate 2.54 times less return on investment than Avantis International. In addition to that, Oakmark International is 1.03 times more volatile than Avantis International Small. It trades about 0.07 of its total potential returns per unit of risk. Avantis International Small is currently generating about 0.18 per unit of volatility. If you would invest  1,157  in Avantis International Small on February 10, 2024 and sell it today you would earn a total of  102.00  from holding Avantis International Small or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Oakmark International Small  vs.  Avantis International Small

Oakmark International

Risk-Adjusted Performance

5 of 100

Modest

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

Avantis International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis International Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Avantis International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Oakmark International and Avantis International

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

The idea behind Oakmark International Small and Avantis International Small 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.