Correlation Between Arbitrage Fund and Merger Fund
Can any of the company-specific risk be diversified away by investing in both Arbitrage Fund and Merger 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 Fund and Merger Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Arbitrage Fund and The Merger Fund, you can compare the effects of market volatilities on Arbitrage Fund and Merger 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 Fund with a short position of Merger Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbitrage Fund and Merger Fund.
Diversification Opportunities for Arbitrage Fund and Merger Fund
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arbitrage and Merger is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and The Merger Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merger Fund and Arbitrage Fund 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 Fund are associated (or correlated) with Merger Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merger Fund has no effect on the direction of Arbitrage Fund i.e., Arbitrage Fund and Merger Fund go up and down completely randomly.
Pair Corralation between Arbitrage Fund and Merger Fund
Assuming the 90 days horizon The Arbitrage Fund is expected to generate 1.7 times more return on investment than Merger Fund. However, Arbitrage Fund is 1.7 times more volatile than The Merger Fund. It trades about 0.09 of its potential returns per unit of risk. The Merger Fund is currently generating about 0.13 per unit of risk. If you would invest 1,257 in The Arbitrage Fund on September 12, 2024 and sell it today you would earn a total of 95.00 from holding The Arbitrage Fund or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.7% |
| Values | Daily Returns |
The Arbitrage Fund vs. The Merger Fund
Performance |
| Timeline |
| Arbitrage Fund |
| Merger Fund |
Arbitrage Fund and Merger Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbitrage Fund and Merger Fund
The main advantage of trading using opposite Arbitrage Fund and Merger Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbitrage Fund position performs unexpectedly, Merger 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 Merger Fund will offset losses from the drop in Merger Fund's long position.| Arbitrage Fund vs. Royce Global Financial | Arbitrage Fund vs. Vanguard Financials Index | Arbitrage Fund vs. Gabelli Global Financial | Arbitrage Fund vs. Goldman Sachs Financial |
| Merger Fund vs. Calamos Market Neutral | Merger Fund vs. Gateway Fund Class | Merger Fund vs. The Arbitrage Fund | Merger Fund vs. Neuberger Berman Long |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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