Correlation Between Merger Fund and Arbitrage Event
Can any of the company-specific risk be diversified away by investing in both Merger Fund and Arbitrage Event 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 Merger Fund and Arbitrage Event 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 The Arbitrage Event Driven, you can compare the effects of market volatilities on Merger Fund and Arbitrage Event 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 Merger Fund with a short position of Arbitrage Event. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merger Fund and Arbitrage Event.
Diversification Opportunities for Merger Fund and Arbitrage Event
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merger and Arbitrage is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Merger Fund and The Arbitrage Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Event and Merger 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 Merger Fund are associated (or correlated) with Arbitrage Event. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Event has no effect on the direction of Merger Fund i.e., Merger Fund and Arbitrage Event go up and down completely randomly.
Pair Corralation between Merger Fund and Arbitrage Event
Assuming the 90 days horizon Merger Fund is expected to generate 1.47 times less return on investment than Arbitrage Event. In addition to that, Merger Fund is 1.09 times more volatile than The Arbitrage Event Driven. It trades about 0.05 of its total potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.08 per unit of volatility. If you would invest 1,179 in The Arbitrage Event Driven on November 3, 2024 and sell it today you would earn a total of 24.00 from holding The Arbitrage Event Driven or generate 2.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Merger Fund vs. The Arbitrage Event Driven
Performance |
| Timeline |
| Merger Fund |
| Arbitrage Event |
Merger Fund and Arbitrage Event Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merger Fund and Arbitrage Event
The main advantage of trading using opposite Merger Fund and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merger Fund position performs unexpectedly, Arbitrage Event 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 Event will offset losses from the drop in Arbitrage Event's long position.| Merger Fund vs. Calamos Market Neutral | Merger Fund vs. Gateway Fund Class | Merger Fund vs. The Arbitrage Fund | Merger Fund vs. Neuberger Berman Long |
| Arbitrage Event vs. Transam Short Term Bond | Arbitrage Event vs. Touchstone Ultra Short | Arbitrage Event vs. Leader Short Term Bond | Arbitrage Event vs. Cmg Ultra Short |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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