Correlation Between Arbitrage Fund and Arbitrage Event
Can any of the company-specific risk be diversified away by investing in both Arbitrage 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 Arbitrage 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 Arbitrage Fund and The Arbitrage Event Driven, you can compare the effects of market volatilities on Arbitrage 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 Arbitrage Fund with a short position of Arbitrage Event. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbitrage Fund and Arbitrage Event.
Diversification Opportunities for Arbitrage Fund and Arbitrage Event
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Arbitrage and Arbitrage is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage 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 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 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 Arbitrage Fund i.e., Arbitrage Fund and Arbitrage Event go up and down completely randomly.
Pair Corralation between Arbitrage Fund and Arbitrage Event
Assuming the 90 days horizon The Arbitrage Fund is expected to generate 1.13 times more return on investment than Arbitrage Event. However, Arbitrage Fund is 1.13 times more volatile than The Arbitrage Event Driven. It trades about 0.6 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.67 per unit of risk. If you would invest 1,330 in The Arbitrage Fund on April 20, 2025 and sell it today you would earn a total of 19.00 from holding The Arbitrage Fund or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Arbitrage Fund vs. The Arbitrage Event Driven
Performance |
| Timeline |
| Arbitrage Fund |
| Arbitrage Event |
Arbitrage Fund and Arbitrage Event Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbitrage Fund and Arbitrage Event
The main advantage of trading using opposite Arbitrage Fund and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbitrage 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.The idea behind The Arbitrage Fund and The Arbitrage Event Driven pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Arbitrage Event vs. The Arbitrage Fund | Arbitrage Event vs. The Arbitrage Fund | Arbitrage Event vs. The Arbitrage Fund | Arbitrage Event vs. The Arbitrage Credit |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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