Correlation Between ARK Genomic and First Trust
Can any of the company-specific risk be diversified away by investing in both ARK Genomic and First Trust 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 ARK Genomic and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARK Genomic Revolution and First Trust Nasdaq, you can compare the effects of market volatilities on ARK Genomic and First Trust 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 ARK Genomic with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Genomic and First Trust.
Diversification Opportunities for ARK Genomic and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ARK and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and ARK Genomic 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 ARK Genomic Revolution are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of ARK Genomic i.e., ARK Genomic and First Trust go up and down completely randomly.
Pair Corralation between ARK Genomic and First Trust
Given the investment horizon of 90 days ARK Genomic is expected to generate 2.18 times less return on investment than First Trust. In addition to that, ARK Genomic is 3.11 times more volatile than First Trust Nasdaq. It trades about 0.0 of its total potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.02 per unit of volatility. If you would invest 2,684 in First Trust Nasdaq on August 31, 2024 and sell it today you would earn a total of 162.00 from holding First Trust Nasdaq or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
ARK Genomic Revolution vs. First Trust Nasdaq
Performance |
| Timeline |
| ARK Genomic Revolution |
| First Trust Nasdaq |
ARK Genomic and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Genomic and First Trust
The main advantage of trading using opposite ARK Genomic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Genomic position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| ARK Genomic vs. Fidelity MSCI Financials | ARK Genomic vs. Fidelity MSCI Consumer | ARK Genomic vs. Fidelity MSCI Consumer | ARK Genomic vs. Fidelity MSCI Industrials |
| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Indxx |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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