Correlation Between AltShares Trust and Arbitrage Event

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

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

Diversification Opportunities for AltShares Trust and Arbitrage Event

0.55

Correlation Coefficient

AltShares Trust  Arbitrage Event

Very weak diversification

The 3 months correlation between AltShares and Arbitrage is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding AltShares Trust 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 AltShares Trust 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 AltShares Trust 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 AltShares Trust i.e., AltShares Trust and Arbitrage Event go up and down completely randomly.

Pair Corralation between AltShares Trust and Arbitrage Event

Considering the 90-day investment horizon AltShares Trust is expected to generate 1.61 times less return on investment than Arbitrage Event. But when comparing it to its historical volatility, AltShares Trust is 1.25 times less risky than Arbitrage Event. It trades about 0.07 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,200  in The Arbitrage Event Driven on February 3, 2025 and sell it today you would earn a total of  18.00  from holding The Arbitrage Event Driven or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AltShares Trust   vs.  The Arbitrage Event Driven

AltShares Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AltShares Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AltShares Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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, Arbitrage Event is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AltShares Trust and Arbitrage Event

The main advantage of trading using opposite AltShares Trust and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AltShares Trust 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 AltShares Trust 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.