Correlation Between The Arbitrage and Arbitrage Credit

Can any of the company-specific risk be diversified away by investing in both The Arbitrage and Arbitrage Credit 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 Arbitrage and Arbitrage Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Arbitrage Event Driven and The Arbitrage Credit, you can compare the effects of market volatilities on The Arbitrage and Arbitrage Credit 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 Arbitrage with a short position of Arbitrage Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and Arbitrage Credit.

Diversification Opportunities for The Arbitrage and Arbitrage Credit

0.0

Correlation Coefficient

The Arbitrage  Arbitrage Credit

Pay attention - limited upside

The 3 months correlation between The and Arbitrage is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Event Driven and The Arbitrage Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Credit and The Arbitrage 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 Event Driven are associated (or correlated) with Arbitrage Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Credit has no effect on the direction of The Arbitrage i.e., The Arbitrage and Arbitrage Credit go up and down completely randomly.

Pair Corralation between The Arbitrage and Arbitrage Credit

If you would invest  1,183  in The Arbitrage Event Driven on February 3, 2025 and sell it today you would earn a total of  17.00  from holding The Arbitrage Event Driven or generate 1.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

The Arbitrage Event Driven  vs.  The Arbitrage Credit

Arbitrage Event

Risk-Adjusted Performance

OK

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

Arbitrage Credit

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Credit are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Arbitrage Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Arbitrage and Arbitrage Credit

The main advantage of trading using opposite The Arbitrage and Arbitrage Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Arbitrage position performs unexpectedly, Arbitrage Credit 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 Credit will offset losses from the drop in Arbitrage Credit's long position.

The idea behind The Arbitrage Event Driven and The Arbitrage Credit 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.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.