Correlation Between Arbitrage Credit and Arbitrage Fund
Can any of the company-specific risk be diversified away by investing in both Arbitrage Credit and Arbitrage Fund 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 Credit and Arbitrage Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Arbitrage Credit and The Arbitrage Fund, you can compare the effects of market volatilities on Arbitrage Credit and Arbitrage Fund 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 Credit with a short position of Arbitrage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbitrage Credit and Arbitrage Fund.
Diversification Opportunities for Arbitrage Credit and Arbitrage Fund
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arbitrage and Arbitrage is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Credit and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Fund and Arbitrage Credit 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 Credit are associated (or correlated) with Arbitrage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Fund has no effect on the direction of Arbitrage Credit i.e., Arbitrage Credit and Arbitrage Fund go up and down completely randomly.
Pair Corralation between Arbitrage Credit and Arbitrage Fund
Assuming the 90 days horizon Arbitrage Credit is expected to generate 2.31 times less return on investment than Arbitrage Fund. But when comparing it to its historical volatility, The Arbitrage Credit is 3.99 times less risky than Arbitrage Fund. It trades about 0.1 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,290 in The Arbitrage Fund on September 15, 2024 and sell it today you would earn a total of 3.00 from holding The Arbitrage Fund or generate 0.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Arbitrage Credit vs. The Arbitrage Fund
Performance |
| Timeline |
| Arbitrage Credit |
| Arbitrage Fund |
Arbitrage Credit and Arbitrage Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbitrage Credit and Arbitrage Fund
The main advantage of trading using opposite Arbitrage Credit and Arbitrage Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbitrage Credit position performs unexpectedly, Arbitrage Fund 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 Arbitrage Fund will offset losses from the drop in Arbitrage Fund's long position.| Arbitrage Credit vs. The Arbitrage Fund | Arbitrage Credit vs. The Arbitrage Fund | Arbitrage Credit vs. The Arbitrage Fund | Arbitrage Credit vs. The Arbitrage Credit |
| Arbitrage Fund vs. The Arbitrage Fund | Arbitrage Fund vs. The Arbitrage Credit | Arbitrage Fund vs. The Arbitrage Credit | Arbitrage Fund vs. The Arbitrage Event Driven |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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