Correlation Between The Arbitrage and Boston Partners

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

By analyzing existing cross correlation between The Arbitrage Fund and Boston Partners Longshort, you can compare the effects of market volatilities on The Arbitrage and Boston Partners 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 Boston Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and Boston Partners.

Diversification Opportunities for The Arbitrage and Boston Partners

0.72

Correlation Coefficient

The Arbitrage  Boston Partners

Poor diversification

The 3 months correlation between The and Boston is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Boston Partners Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Longshort 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 Fund are associated (or correlated) with Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Longshort has no effect on the direction of The Arbitrage i.e., The Arbitrage and Boston Partners go up and down completely randomly.

Pair Corralation between The Arbitrage and Boston Partners

Assuming the 90 days horizon The Arbitrage Fund is expected to generate 0.06 times more return on investment than Boston Partners. However, The Arbitrage Fund is 15.85 times less risky than Boston Partners. It trades about -0.06 of its potential returns per unit of risk. Boston Partners Longshort is currently generating about -0.26 per unit of risk. If you would invest  1,300  in The Arbitrage Fund on October 10, 2024 and sell it today you would lose (5.00) from holding The Arbitrage Fund or give up 0.38% of portfolio value over 90 days.

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

The Arbitrage Fund  vs.  Boston Partners Longshort

The Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Arbitrage Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Boston Partners Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Partners Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with The Arbitrage and Boston Partners

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

The idea behind The Arbitrage Fund and Boston Partners Longshort 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.