Correlation Between Arbitrage Fund and Boston Partners

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

Diversification Opportunities for Arbitrage Fund and Boston Partners

0.4

Correlation Coefficient

Arbitrage Fund  Boston Partners

Very weak diversification

The 3 months correlation between Arbitrage and Boston is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Boston Partners Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Longshort 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 Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Longshort has no effect on the direction of Arbitrage Fund i.e., Arbitrage Fund and Boston Partners go up and down completely randomly.

Pair Corralation between Arbitrage Fund and Boston Partners

Assuming the 90 days horizon The Arbitrage Fund is expected to generate 0.16 times more return on investment than Boston Partners. However, The Arbitrage Fund is 6.25 times less risky than Boston Partners. It trades about 0.02 of its potential returns per unit of risk. Boston Partners Longshort is currently generating about -0.09 per unit of risk. If you would invest  1,292  in The Arbitrage Fund on September 15, 2024 and sell it today you would earn a total of  4.00  from holding The Arbitrage Fund or generate 0.31% return on investment over 90 days.

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

The Arbitrage Fund  vs.  Boston Partners Longshort

Arbitrage Fund

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Arbitrage Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Partners Longshort

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Boston Partners Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Arbitrage Fund and Boston Partners

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

The idea behind The Arbitrage Fund and Boston Partners Longshort 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.