Correlation Between Russell 2000 and Arbitrage Event
Can any of the company-specific risk be diversified away by investing in both Russell 2000 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 Russell 2000 and Arbitrage Event into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell 2000 2x and The Arbitrage Event Driven, you can compare the effects of market volatilities on Russell 2000 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 Russell 2000 with a short position of Arbitrage Event. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Arbitrage Event.
Diversification Opportunities for Russell 2000 and Arbitrage Event
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Russell and Arbitrage is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x 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 Russell 2000 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 Russell 2000 2x 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 Russell 2000 i.e., Russell 2000 and Arbitrage Event go up and down completely randomly.
Pair Corralation between Russell 2000 and Arbitrage Event
Assuming the 90 days horizon Russell 2000 2x is expected to generate 17.99 times more return on investment than Arbitrage Event. However, Russell 2000 is 17.99 times more volatile than The Arbitrage Event Driven. It trades about 0.24 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.49 per unit of risk. If you would invest 11,164 in Russell 2000 2x on April 22, 2025 and sell it today you would earn a total of 4,235 from holding Russell 2000 2x or generate 37.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell 2000 2x vs. The Arbitrage Event Driven
Performance |
| Timeline |
| Russell 2000 2x |
| Arbitrage Event |
Russell 2000 and Arbitrage Event Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell 2000 and Arbitrage Event
The main advantage of trading using opposite Russell 2000 and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 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.| Russell 2000 vs. Lord Abbett Small | Russell 2000 vs. Boston Partners Small | Russell 2000 vs. Omni Small Cap Value | Russell 2000 vs. Pace Smallmedium Value |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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