Hedge Fund Strategy Performances during Corona Virus Disease2019

Abstract

The COVID-19 has brought huge impact on the capital market around the global. Since hedge fund is regarded as a useful risk manage tool, investors became curious of the profitability of this financial strategy. This article presents the performance of two main strategies-merger arbitrage and long short equity trade-utilized in hedge funds from the beginning of 2020 to the end of 2021. Stocks in each strategy are chosen from fields covering consumption, luxury, medicine and real estate. The cases of merger arbitrage strategy analyzed in this paper were chosen from presented news or announcements, while the portfolios of long short equity trades were selected based on its correlation and beta. In the following analysis, historical data of all involved stock prices were analyzed through line charts. Furthermore, the performance of each hedge case was measured through excess return, Sharpe ratio and Sortino ratio. Based on comparisons, long short equity outperforms merger arbitrage in usual cases and field profitability follows luxury > medicine > consumption > real estate. These results shed light on guiding investment decision in terms of hedge fund strategies.