Correlation Between The Merger and Dow Jones
Can any of the company-specific risk be diversified away by investing in both The Merger and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on The Merger and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Merger and Dow Jones.
Diversification Opportunities for The Merger and Dow Jones
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between The and Dow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Merger Fund and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of The Merger i.e., The Merger and Dow Jones go up and down completely randomly.
Pair Corralation between The Merger and Dow Jones
Assuming the 90 days horizon The Merger is expected to generate 64.96 times less return on investment than Dow Jones. But when comparing it to its historical volatility, The Merger Fund is 4.85 times less risky than Dow Jones. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Merger Fund vs. Dow Jones Industrial
Performance |
| Timeline |
The Merger and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
The Merger Fund
Pair trading matchups for The Merger
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with The Merger and Dow Jones
The main advantage of trading using opposite The Merger and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Merger position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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