Hello, welcome back. We have been discussing strategies for selection of different types of mutual funds. Now, we will see the last type of mutual funds in our course, for selection into our portfolio that is the arbitrage fund. So, we will see a strategy how we can select arbitrage fund to be part of our portfolio as has been the case with other types of mutual funds, we will start with this set of recommended arbitrage funds from experts financial newspapers, banks, journals, websites etc. Then, we will conduct fundamental analysis of these arbitrage funds collecting the metrics for each of these funds. Then, based on the metrics we have collected, we will look at the metric for treynor ratio.

Now, we know that arbitrage funds basically work on volatility of the market. So, the volatility is the main factor based on which arbitrage funds work. The treynor ratio is the ratio which provides reward to volatility ratio So, this is a measure we will take for selection of arbitrage funds, we will select the arbitrage fund which has the maximum treynor ratio that is a maximum reward to volatility. For the purpose of illustration, I have taken five arbitrage funds from the Indian market. Now, these are not any recommendation This is just for the purpose of illustration. The funds which I have taken are a little bit less online arbitrage fund access arbitrage fund, Invesco, India arbitrage fund kotak equity arbitrage fund and lnt arbitrage opportunities fund from the Economic Times website I have gathered the data for expected returns standard deviation and Turner ratio for all the five arbitrage funds that we are studying.

Now, if you notice that there is a huge variability in the tenor ratios of these five funds, so we will utilize this journal issue for selecting the best arbitrage fund we can possibly select for including in our portfolio now arranged arbitrage In the descending order of the tenors issue, we find that lnt arbitrage opportunity fund has the highest data ratio and thus we will select that fund in our sample portfolio given here as a matrix for the lnt arbitrage opportunity fund, I have collected this data from Economic Times website. Thank you for listening. See you in the next lecture.