Correlation Between Vivaldi Merger and First Trust/confluence

Can any of the company-specific risk be diversified away by investing in both Vivaldi Merger and First Trust/confluence 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 Vivaldi Merger and First Trust/confluence into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vivaldi Merger Arbitrage and First Trustconfluence Small, you can compare the effects of market volatilities on Vivaldi Merger and First Trust/confluence 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 Vivaldi Merger with a short position of First Trust/confluence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vivaldi Merger and First Trust/confluence.

Diversification Opportunities for Vivaldi Merger and First Trust/confluence

0.49

Correlation Coefficient

Vivaldi Merger  First Trust/confluence

Very weak diversification

The 3 months correlation between Vivaldi and First is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vivaldi Merger Arbitrage and First Trustconfluence Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust/confluence and Vivaldi 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 Vivaldi Merger Arbitrage are associated (or correlated) with First Trust/confluence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust/confluence has no effect on the direction of Vivaldi Merger i.e., Vivaldi Merger and First Trust/confluence go up and down completely randomly.

Pair Corralation between Vivaldi Merger and First Trust/confluence

Assuming the 90 days horizon Vivaldi Merger Arbitrage is expected to generate 0.3 times more return on investment than First Trust/confluence. However, Vivaldi Merger Arbitrage is 3.3 times less risky than First Trust/confluence. It trades about -0.03 of its potential returns per unit of risk. First Trustconfluence Small is currently generating about -0.07 per unit of risk. If you would invest  1,058  in Vivaldi Merger Arbitrage on December 4, 2024 and sell it today you would lose (14.00) from holding Vivaldi Merger Arbitrage or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Vivaldi Merger Arbitrage  vs.  First Trustconfluence Small

Vivaldi Merger Arbitrage

Risk-Adjusted Performance

Very Weak

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

First Trust/confluence

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trustconfluence Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vivaldi Merger and First Trust/confluence

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

The idea behind Vivaldi Merger Arbitrage and First Trustconfluence Small 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.