Correlation Between Arbitrage Fund and Small Pany

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

Diversification Opportunities for Arbitrage Fund and Small Pany

-0.36

Correlation Coefficient

Arbitrage Fund  Small Pany

Very good diversification

The 3 months correlation between Arbitrage and Small is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Arbitrage Fund 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 Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Arbitrage Fund i.e., Arbitrage Fund and Small Pany go up and down completely randomly.

Pair Corralation between Arbitrage Fund and Small Pany

Assuming the 90 days horizon The Arbitrage Fund is expected to generate 0.09 times more return on investment than Small Pany. However, The Arbitrage Fund is 11.66 times less risky than Small Pany. It trades about 0.26 of its potential returns per unit of risk. Small Pany Growth is currently generating about -0.09 per unit of risk. If you would invest  1,276  in The Arbitrage Fund on December 19, 2024 and sell it today you would earn a total of  35.00  from holding The Arbitrage Fund or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

The Arbitrage Fund  vs.  Small Pany Growth

Arbitrage Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Arbitrage Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Pany Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Arbitrage Fund and Small Pany

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

The idea behind The Arbitrage Fund and Small Pany Growth 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.