Correlation Between The Merger and Leuthold Core

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

By analyzing existing cross correlation between The Merger Fund and Leuthold E Investment, you can compare the effects of market volatilities on The Merger and Leuthold Core 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 Merger with a short position of Leuthold Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Merger and Leuthold Core.

Diversification Opportunities for The Merger and Leuthold Core

0.62

Correlation Coefficient

The Merger  Leuthold Core

Poor diversification

The 3 months correlation between The and Leuthold is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Merger Fund and Leuthold E Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leuthold E Investment and The Merger 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 Merger Fund are associated (or correlated) with Leuthold Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leuthold E Investment has no effect on the direction of The Merger i.e., The Merger and Leuthold Core go up and down completely randomly.

Pair Corralation between The Merger and Leuthold Core

Assuming the 90 days horizon The Merger Fund is expected to generate 0.33 times more return on investment than Leuthold Core. However, The Merger Fund is 3.0 times less risky than Leuthold Core. It trades about -0.02 of its potential returns per unit of risk. Leuthold E Investment is currently generating about -0.07 per unit of risk. If you would invest  1,733  in The Merger Fund on October 24, 2024 and sell it today you would lose (5.00) from holding The Merger Fund or give up 0.29% of portfolio value over 90 days.

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

The Merger Fund  vs.  Leuthold E Investment

Merger Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Leuthold E Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Merger and Leuthold Core

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

The idea behind The Merger Fund and Leuthold E Investment 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.