Correlation Between The Arbitrage and Lazard Capital

Can any of the company-specific risk be diversified away by investing in both The Arbitrage and Lazard Capital 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 The Arbitrage and Lazard Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Arbitrage Event Driven and Lazard Capital Allocator, you can compare the effects of market volatilities on The Arbitrage and Lazard Capital 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 The Arbitrage with a short position of Lazard Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and Lazard Capital.

Diversification Opportunities for The Arbitrage and Lazard Capital

0.22

Correlation Coefficient

The Arbitrage  Lazard Capital

Modest diversification

The 3 months correlation between The and Lazard is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Event Driven and Lazard Capital Allocator in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Capital Allocator and The Arbitrage 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 The Arbitrage Event Driven are associated (or correlated) with Lazard Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Capital Allocator has no effect on the direction of The Arbitrage i.e., The Arbitrage and Lazard Capital go up and down completely randomly.

Pair Corralation between The Arbitrage and Lazard Capital

Assuming the 90 days horizon The Arbitrage is expected to generate 2.88 times less return on investment than Lazard Capital. But when comparing it to its historical volatility, The Arbitrage Event Driven is 2.77 times less risky than Lazard Capital. It trades about 0.07 of its potential returns per unit of risk. Lazard Capital Allocator is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  919.00  in Lazard Capital Allocator on September 10, 2024 and sell it today you would earn a total of  227.00  from holding Lazard Capital Allocator or generate 24.7% return on investment over 90 days.

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

The Arbitrage Event Driven  vs.  Lazard Capital Allocator

Arbitrage Event

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, The Arbitrage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lazard Capital Allocator

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Capital Allocator are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly conflicting forward indicators, Lazard Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with The Arbitrage and Lazard Capital

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

The idea behind The Arbitrage Event Driven and Lazard Capital Allocator 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.