Correlation Between LS 1x and LS ARK
Can any of the company-specific risk be diversified away by investing in both LS 1x and LS ARK 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 LS 1x and LS ARK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LS 1x Amazon and LS ARK Innovation, you can compare the effects of market volatilities on LS 1x and LS ARK 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 LS 1x with a short position of LS ARK. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS 1x and LS ARK.
Diversification Opportunities for LS 1x and LS ARK
Poor diversification
The 3 months correlation between 1AMZ and ARKA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding LS 1x Amazon and LS ARK Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS ARK Innovation and LS 1x 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 LS 1x Amazon are associated (or correlated) with LS ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS ARK Innovation has no effect on the direction of LS 1x i.e., LS 1x and LS ARK go up and down completely randomly.
Pair Corralation between LS 1x and LS ARK
Assuming the 90 days trading horizon LS 1x Amazon is expected to generate 0.77 times more return on investment than LS ARK. However, LS 1x Amazon is 1.3 times less risky than LS ARK. It trades about -0.23 of its potential returns per unit of risk. LS ARK Innovation is currently generating about -0.18 per unit of risk. If you would invest 711.00 in LS 1x Amazon on November 28, 2024 and sell it today you would lose (80.00) from holding LS 1x Amazon or give up 11.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LS 1x Amazon vs. LS ARK Innovation
Performance |
| Timeline |
| LS 1x Amazon |
| LS ARK Innovation |
LS 1x and LS ARK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LS 1x and LS ARK
The main advantage of trading using opposite LS 1x and LS ARK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS 1x position performs unexpectedly, LS ARK 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 LS ARK will offset losses from the drop in LS ARK's long position.| LS 1x vs. iShares MSCI Japan | LS 1x vs. Amundi EUR High | LS 1x vs. iShares JP Morgan | LS 1x vs. Xtrackers MSCI |
| LS ARK vs. iShares MSCI Japan | LS ARK vs. Amundi EUR High | LS ARK vs. iShares JP Morgan | LS ARK vs. Xtrackers MSCI |
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 the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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