Correlation Between Fulcrum Diversified and Arbitrage Event

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Can any of the company-specific risk be diversified away by investing in both Fulcrum Diversified 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 Fulcrum Diversified and Arbitrage Event into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fulcrum Diversified Absolute and The Arbitrage Event Driven, you can compare the effects of market volatilities on Fulcrum Diversified 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 Fulcrum Diversified with a short position of Arbitrage Event. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Arbitrage Event.

Diversification Opportunities for Fulcrum Diversified and Arbitrage Event

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fulcrum and Arbitrage is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute 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 Fulcrum Diversified 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 Fulcrum Diversified Absolute 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 Fulcrum Diversified i.e., Fulcrum Diversified and Arbitrage Event go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Arbitrage Event

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to generate 1.83 times more return on investment than Arbitrage Event. However, Fulcrum Diversified is 1.83 times more volatile than The Arbitrage Event Driven. It trades about 0.08 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.12 per unit of risk. If you would invest  930.00  in Fulcrum Diversified Absolute on April 26, 2025 and sell it today you would earn a total of  54.00  from holding Fulcrum Diversified Absolute or generate 5.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fulcrum Diversified Absolute  vs.  The Arbitrage Event Driven

 Performance 
       Timeline  
Fulcrum Diversified 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Fulcrum Diversified Absolute are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fulcrum Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Arbitrage Event 

Risk-Adjusted Performance

Very Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 36 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Arbitrage Event is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fulcrum Diversified and Arbitrage Event Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fulcrum Diversified and Arbitrage Event

The main advantage of trading using opposite Fulcrum Diversified and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fulcrum Diversified 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 Fulcrum Diversified Absolute 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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