Correlation Between The Arbitrage and The Merger
Can any of the company-specific risk be diversified away by investing in both The Arbitrage and The Merger 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 The Merger 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 The Merger Fund, you can compare the effects of market volatilities on The Arbitrage and The Merger 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 The Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and The Merger.
Diversification Opportunities for The Arbitrage and The Merger
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between The and The is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and The Merger Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merger Fund 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 The Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merger Fund has no effect on the direction of The Arbitrage i.e., The Arbitrage and The Merger go up and down completely randomly.
Pair Corralation between The Arbitrage and The Merger
Assuming the 90 days horizon The Arbitrage Fund is expected to generate 0.84 times more return on investment than The Merger. However, The Arbitrage Fund is 1.2 times less risky than The Merger. It trades about 0.33 of its potential returns per unit of risk. The Merger Fund is currently generating about 0.26 per unit of risk. If you would invest 1,358 in The Arbitrage Fund on December 2, 2024 and sell it today you would earn a total of 17.00 from holding The Arbitrage Fund or generate 1.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
The Arbitrage Fund vs. The Merger Fund
Performance |
Timeline |
The Arbitrage |
Merger Fund |
The Arbitrage and The Merger Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with The Arbitrage and The Merger
The main advantage of trading using opposite The Arbitrage and The Merger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Arbitrage position performs unexpectedly, The Merger 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 Merger will offset losses from the drop in The Merger's long position.The Arbitrage vs. Transamerica Emerging Markets | The Arbitrage vs. Calvert Developed Market | The Arbitrage vs. Doubleline Emerging Markets | The Arbitrage vs. Jhancock Diversified Macro |
The Merger vs. Strategic Advisers International | The Merger vs. Strategic Advisers Income | The Merger vs. Strategic Advisers E | The Merger vs. Strategic Advisers Emerging |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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