Correlation Between Arbitrage Event and The Arbitrage

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

Diversification Opportunities for Arbitrage Event and The Arbitrage

0.98

Correlation Coefficient

Arbitrage Event  The Arbitrage

Almost no diversification

The 3 months correlation between Arbitrage and The is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Event Driven and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Arbitrage and Arbitrage Event 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 The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Arbitrage has no effect on the direction of Arbitrage Event i.e., Arbitrage Event and The Arbitrage go up and down completely randomly.

Pair Corralation between Arbitrage Event and The Arbitrage

Assuming the 90 days horizon The Arbitrage Event Driven is expected to generate 0.88 times more return on investment than The Arbitrage. However, The Arbitrage Event Driven is 1.14 times less risky than The Arbitrage. It trades about 0.32 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.25 per unit of risk. If you would invest  1,183  in The Arbitrage Event Driven on December 4, 2024 and sell it today you would earn a total of  14.00  from holding The Arbitrage Event Driven or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

The Arbitrage Event Driven  vs.  The Arbitrage Fund

Arbitrage Event

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Arbitrage Event is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

The Arbitrage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 10 (%) 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.

Pair Trading with Arbitrage Event and The Arbitrage

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

The idea behind The Arbitrage Event Driven and The Arbitrage 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.