Correlation Between Lazard International and The Arbitrage

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

By analyzing existing cross correlation between Lazard International Equity and The Arbitrage Event Driven, you can compare the effects of market volatilities on Lazard International 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 Lazard International with a short position of The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lazard International and The Arbitrage.

Diversification Opportunities for Lazard International and The Arbitrage

0.23

Correlation Coefficient

Lazard International  The Arbitrage

Modest diversification

The 3 months correlation between Lazard and The is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lazard International Equity and The Arbitrage Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Event and Lazard International 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 Lazard International Equity 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 Arbitrage Event has no effect on the direction of Lazard International i.e., Lazard International and The Arbitrage go up and down completely randomly.

Pair Corralation between Lazard International and The Arbitrage

Assuming the 90 days horizon Lazard International Equity is expected to generate 3.25 times more return on investment than The Arbitrage. However, Lazard International is 3.25 times more volatile than The Arbitrage Event Driven. It trades about 0.05 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.07 per unit of risk. If you would invest  938.00  in Lazard International Equity on September 10, 2024 and sell it today you would earn a total of  188.00  from holding Lazard International Equity or generate 20.04% return on investment over 90 days.

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

Lazard International Equity  vs.  The Arbitrage Event Driven

Lazard International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lazard International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lazard International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arbitrage Event

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 3 (%) 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 Lazard International and The Arbitrage

The main advantage of trading using opposite Lazard International and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lazard International 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 Lazard International Equity and The Arbitrage Event Driven 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.