Correlation Between Arbitrage Fund and Intermediate Term

Can any of the company-specific risk be diversified away by investing in both Arbitrage Fund and Intermediate Term 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 Intermediate Term 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 Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on Arbitrage Fund and Intermediate Term 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 Intermediate Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbitrage Fund and Intermediate Term.

Diversification Opportunities for Arbitrage Fund and Intermediate Term

0.61

Correlation Coefficient

Arbitrage Fund  Intermediate Term

Poor diversification

The 3 months correlation between Arbitrage and Intermediate is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Arbitrage Fund i.e., Arbitrage Fund and Intermediate Term go up and down completely randomly.

Pair Corralation between Arbitrage Fund and Intermediate Term

Assuming the 90 days horizon The Arbitrage Fund is expected to generate 0.9 times more return on investment than Intermediate Term. However, The Arbitrage Fund is 1.12 times less risky than Intermediate Term. It trades about 0.37 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.11 per unit of risk. If you would invest  1,373  in The Arbitrage Fund on May 5, 2025 and sell it today you would earn a total of  37.00  from holding The Arbitrage Fund or generate 2.69% return on investment over 90 days.

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

The Arbitrage Fund  vs.  Intermediate Term Tax Free Bon

Arbitrage Fund

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Arbitrage Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intermediate Term Tax

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Tax Free Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Intermediate Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arbitrage Fund and Intermediate Term

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

The idea behind The Arbitrage Fund and Intermediate Term Tax Free Bond 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.