Correlation Between Arbitrage Fund and Mid Cap

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

Diversification Opportunities for Arbitrage Fund and Mid Cap

-0.08

Correlation Coefficient

Arbitrage Fund  Mid Cap

Good diversification

The 3 months correlation between Arbitrage and Mid is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Arbitrage Fund i.e., Arbitrage Fund and Mid Cap go up and down completely randomly.

Pair Corralation between Arbitrage Fund and Mid Cap

Assuming the 90 days horizon The Arbitrage Fund is expected to generate 0.11 times more return on investment than Mid Cap. However, The Arbitrage Fund is 9.48 times less risky than Mid Cap. It trades about 0.23 of its potential returns per unit of risk. Mid Cap Growth is currently generating about -0.08 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  32.00  from holding The Arbitrage Fund or generate 2.51% return on investment over 90 days.

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

The Arbitrage Fund  vs.  Mid Cap 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 18 (%) 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.

Mid Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Mid Cap

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

The idea behind The Arbitrage Fund and Mid Cap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.