Correlation Between Merger Fund and Dupont Denemours

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Can any of the company-specific risk be diversified away by investing in both Merger Fund and Dupont Denemours 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 Dupont Denemours into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merger Fund and Dupont Denemours, you can compare the effects of market volatilities on Merger Fund and Dupont Denemours 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 Dupont Denemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merger Fund and Dupont Denemours.

Diversification Opportunities for Merger Fund and Dupont Denemours

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Merger and Dupont is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Merger Fund and Dupont Denemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont Denemours 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 Merger Fund are associated (or correlated) with Dupont Denemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont Denemours has no effect on the direction of Merger Fund i.e., Merger Fund and Dupont Denemours go up and down completely randomly.

Pair Corralation between Merger Fund and Dupont Denemours

Assuming the 90 days horizon Merger Fund is expected to generate 0.12 times more return on investment than Dupont Denemours. However, Merger Fund is 8.39 times less risky than Dupont Denemours. It trades about 0.18 of its potential returns per unit of risk. Dupont Denemours is currently generating about -0.01 per unit of risk. If you would invest  1,702  in Merger Fund on May 19, 2022 and sell it today you would earn a total of  46.00  from holding Merger Fund or generate 2.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.39%
ValuesDaily Returns

Merger Fund  vs.  Dupont Denemours

 Performance (%) 
       Timeline  
Merger Fund 
Merger Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merger Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Merger Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Merger Price Channel

Dupont Denemours 
Dupont Performance
0 of 100
Over the last 90 days Dupont Denemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont Denemours is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dupont Price Channel

Merger Fund and Dupont Denemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merger Fund and Dupont Denemours

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

Merger Fund

Pair trading matchups for Merger Fund

The idea behind Merger Fund and Dupont Denemours 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.
Check out your portfolio center. 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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