Correlation Between Rational/pier and The Arbitrage

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

By analyzing existing cross correlation between Rationalpier 88 Convertible and The Arbitrage Fund, you can compare the effects of market volatilities on Rational/pier 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 Rational/pier with a short position of The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational/pier and The Arbitrage.

Diversification Opportunities for Rational/pier and The Arbitrage

0.21

Correlation Coefficient

Rational/pier  The Arbitrage

Modest diversification

The 3 months correlation between Rational/pier and The is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rationalpier 88 Convertible and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Arbitrage and Rational/pier 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 Rationalpier 88 Convertible 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 The Arbitrage has no effect on the direction of Rational/pier i.e., Rational/pier and The Arbitrage go up and down completely randomly.

Pair Corralation between Rational/pier and The Arbitrage

Assuming the 90 days horizon Rationalpier 88 Convertible is expected to under-perform the The Arbitrage. In addition to that, Rational/pier is 2.28 times more volatile than The Arbitrage Fund. It trades about -0.05 of its total potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.32 per unit of volatility. If you would invest  1,195  in The Arbitrage Fund on December 2, 2024 and sell it today you would earn a total of  15.00  from holding The Arbitrage Fund or generate 1.26% return on investment over 90 days.

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

Rationalpier 88 Convertible  vs.  The Arbitrage Fund

Rationalpier 88 Conv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rationalpier 88 Convertible has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Rational/pier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

The Arbitrage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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 Rational/pier and The Arbitrage

The main advantage of trading using opposite Rational/pier and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational/pier 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 Rationalpier 88 Convertible and The Arbitrage Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.