Correlation Between The Merger and Arbitrage Event

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

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

Diversification Opportunities for The Merger and Arbitrage Event

0.0

Correlation Coefficient

The Merger  Arbitrage Event

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 Merger Fund 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 The Merger 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 Merger Fund 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 The Merger i.e., The Merger and Arbitrage Event go up and down completely randomly.

Pair Corralation between The Merger and Arbitrage Event

If you would invest  1,199  in The Arbitrage Event Driven on May 3, 2025 and sell it today you would earn a total of  37.00  from holding The Arbitrage Event Driven or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

The Merger Fund  vs.  The Arbitrage Event Driven

Merger Fund

Risk-Adjusted Performance

Very Strong

Over the last 90 days The Merger Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, The Merger 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

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental 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 The Merger and Arbitrage Event

The main advantage of trading using opposite The Merger and Arbitrage Event positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Merger 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 The Merger Fund 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.