Correlation Between ARK Innovation and ARK Next
Can any of the company-specific risk be diversified away by investing in both ARK Innovation and ARK Next 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 Innovation and ARK Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARK Innovation ETF and ARK Next Generation, you can compare the effects of market volatilities on ARK Innovation and ARK Next 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 Innovation with a short position of ARK Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Innovation and ARK Next.
Diversification Opportunities for ARK Innovation and ARK Next
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ARK and ARK is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding ARK Innovation ETF and ARK Next Generation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Next Generation and ARK Innovation 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 Innovation ETF are associated (or correlated) with ARK Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Next Generation has no effect on the direction of ARK Innovation i.e., ARK Innovation and ARK Next go up and down completely randomly.
Pair Corralation between ARK Innovation and ARK Next
Given the investment horizon of 90 days ARK Innovation is expected to generate 1.09 times less return on investment than ARK Next. In addition to that, ARK Innovation is 1.23 times more volatile than ARK Next Generation. It trades about 0.27 of its total potential returns per unit of risk. ARK Next Generation is currently generating about 0.36 per unit of volatility. If you would invest 8,978 in ARK Next Generation on August 28, 2024 and sell it today you would earn a total of 1,800 from holding ARK Next Generation or generate 20.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARK Innovation ETF vs. ARK Next Generation
Performance |
| Timeline |
| ARK Innovation ETF |
| ARK Next Generation |
ARK Innovation and ARK Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Innovation and ARK Next
The main advantage of trading using opposite ARK Innovation and ARK Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Innovation position performs unexpectedly, ARK Next 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 ARK Next will offset losses from the drop in ARK Next's long position.| ARK Innovation vs. iShares Dividend and | ARK Innovation vs. Martin Currie Sustainable | ARK Innovation vs. VictoryShares THB Mid | ARK Innovation vs. Mast Global Battery |
| ARK Next vs. Invesco DWA Utilities | ARK Next vs. Invesco Dynamic Large | ARK Next vs. Invesco Dynamic Large | ARK Next vs. HUMANA INC |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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