Correlation Between Merger Fund and Strategic Advisers

Can any of the company-specific risk be diversified away by investing in both Merger Fund and Strategic Advisers 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 Merger Fund and Strategic Advisers 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 Strategic Advisers International, you can compare the effects of market volatilities on Merger Fund and Strategic Advisers 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 Merger Fund with a short position of Strategic Advisers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merger Fund and Strategic Advisers.

Diversification Opportunities for Merger Fund and Strategic Advisers

0.31

Correlation Coefficient

Merger Fund  Strategic Advisers

Weak diversification

The 3 months correlation between Merger and Strategic is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding The Merger Fund and Strategic Advisers Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Advisers and Merger 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 Merger Fund are associated (or correlated) with Strategic Advisers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Advisers has no effect on the direction of Merger Fund i.e., Merger Fund and Strategic Advisers go up and down completely randomly.

Pair Corralation between Merger Fund and Strategic Advisers

Assuming the 90 days horizon The Merger Fund is expected to generate 0.22 times more return on investment than Strategic Advisers. However, The Merger Fund is 4.64 times less risky than Strategic Advisers. It trades about 0.05 of its potential returns per unit of risk. Strategic Advisers International is currently generating about -0.06 per unit of risk. If you would invest  1,732  in The Merger Fund on September 15, 2024 and sell it today you would earn a total of  8.00  from holding The Merger Fund or generate 0.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

The Merger Fund  vs.  Strategic Advisers Internation

Merger Fund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Merger Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Merger Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Strategic Advisers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Advisers International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Strategic Advisers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merger Fund and Strategic Advisers

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

The idea behind The Merger Fund and Strategic Advisers International 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.