Correlation Between ARK Innovation and American Century
Can any of the company-specific risk be diversified away by investing in both ARK Innovation and American Century 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 American Century 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 American Century Mid, you can compare the effects of market volatilities on ARK Innovation and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Innovation and American Century.
Diversification Opportunities for ARK Innovation and American Century
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARK and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ARK Innovation ETF and American Century Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Mid 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Mid has no effect on the direction of ARK Innovation i.e., ARK Innovation and American Century go up and down completely randomly.
Pair Corralation between ARK Innovation and American Century
Given the investment horizon of 90 days ARK Innovation ETF is expected to generate 2.59 times more return on investment than American Century. However, ARK Innovation is 2.59 times more volatile than American Century Mid. It trades about 0.26 of its potential returns per unit of risk. American Century Mid is currently generating about 0.13 per unit of risk. If you would invest 4,841 in ARK Innovation ETF on August 30, 2024 and sell it today you would earn a total of 874.00 from holding ARK Innovation ETF or generate 18.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARK Innovation ETF vs. American Century Mid
Performance |
| Timeline |
| ARK Innovation ETF |
| American Century Mid |
ARK Innovation and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Innovation and American Century
The main advantage of trading using opposite ARK Innovation and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Innovation position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century'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 |
| American Century vs. American Century Sustainable | American Century vs. American Century ETF | American Century vs. Sprott Focus Trust | American Century vs. American Century Quality |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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