Correlation Between ARK Innovation and First Trust
Can any of the company-specific risk be diversified away by investing in both ARK Innovation 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 Innovation 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 Innovation ETF and First Trust Equity, you can compare the effects of market volatilities on ARK Innovation 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 Innovation with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Innovation and First Trust.
Diversification Opportunities for ARK Innovation and First Trust
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ARK and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ARK Innovation ETF and First Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Equity 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 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 Equity has no effect on the direction of ARK Innovation i.e., ARK Innovation and First Trust go up and down completely randomly.
Pair Corralation between ARK Innovation and First Trust
Given the investment horizon of 90 days ARK Innovation ETF is expected to generate 1.18 times more return on investment than First Trust. However, ARK Innovation is 1.18 times more volatile than First Trust Equity. It trades about 0.21 of its potential returns per unit of risk. First Trust Equity is currently generating about 0.23 per unit of risk. If you would invest 5,677 in ARK Innovation ETF on November 1, 2024 and sell it today you would earn a total of 509.00 from holding ARK Innovation ETF or generate 8.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARK Innovation ETF vs. First Trust Equity
Performance |
| Timeline |
| ARK Innovation ETF |
| First Trust Equity |
ARK Innovation and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Innovation and First Trust
The main advantage of trading using opposite ARK Innovation and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Innovation 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 Innovation vs. Freedom Day Dividend | ARK Innovation vs. Franklin Templeton ETF | ARK Innovation vs. iShares MSCI China | ARK Innovation vs. Tidal Trust II |
| First Trust vs. Invesco SP Spin Off | First Trust vs. Renaissance IPO ETF | First Trust vs. First Trust NYSE | First Trust vs. Invesco BuyBack Achievers |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |