Correlation Between The Merger and Arbitrage Fund
Can any of the company-specific risk be diversified away by investing in both The Merger 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 The Merger 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 Merger Fund and The Arbitrage Fund, you can compare the effects of market volatilities on The Merger 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 The Merger with a short position of Arbitrage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Merger and Arbitrage Fund.
Diversification Opportunities for The Merger and Arbitrage Fund
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between THE and Arbitrage is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Merger Fund and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Fund and The 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 The Merger Fund 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 The Merger i.e., The Merger and Arbitrage Fund go up and down completely randomly.
Pair Corralation between The Merger and Arbitrage Fund
Assuming the 90 days horizon The Merger Fund is expected to under-perform the Arbitrage Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Merger Fund is 1.23 times less risky than Arbitrage Fund. The mutual fund trades about -0.01 of its potential returns per unit of risk. The The Arbitrage Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,296 in The Arbitrage Fund on August 29, 2024 and sell it today you would earn a total of 5.00 from holding The Arbitrage Fund or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
The Merger Fund vs. The Arbitrage Fund
Performance |
| Timeline |
| Merger Fund |
| Arbitrage Fund |
The Merger and Arbitrage Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Merger and Arbitrage Fund
The main advantage of trading using opposite The Merger and Arbitrage Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Merger 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.| The Merger vs. Calamos Market Neutral | The Merger vs. Gateway Fund Class | The Merger vs. The Arbitrage Fund | The Merger vs. Neuberger Berman Long |
| Arbitrage Fund vs. The Merger Fund | Arbitrage Fund vs. Calamos Market Neutral | Arbitrage Fund vs. Hussman Strategic Growth | Arbitrage Fund vs. Gateway Fund Class |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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