Correlation Between ARK Next and ARK Space
Can any of the company-specific risk be diversified away by investing in both ARK Next and ARK Space 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 Next and ARK Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARK Next Generation and ARK Space Exploration, you can compare the effects of market volatilities on ARK Next and ARK Space 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 Next with a short position of ARK Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and ARK Space.
Diversification Opportunities for ARK Next and ARK Space
Almost no diversification
The 3 months correlation between ARK and ARK is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and ARK Space Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Space Exploration and ARK Next 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 Next Generation are associated (or correlated) with ARK Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Space Exploration has no effect on the direction of ARK Next i.e., ARK Next and ARK Space go up and down completely randomly.
Pair Corralation between ARK Next and ARK Space
Given the investment horizon of 90 days ARK Next is expected to generate 1.2 times less return on investment than ARK Space. In addition to that, ARK Next is 1.02 times more volatile than ARK Space Exploration. It trades about 0.07 of its total potential returns per unit of risk. ARK Space Exploration is currently generating about 0.09 per unit of volatility. If you would invest 1,953 in ARK Space Exploration on October 21, 2024 and sell it today you would earn a total of 62.00 from holding ARK Space Exploration or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARK Next Generation vs. ARK Space Exploration
Performance |
| Timeline |
| ARK Next Generation |
| ARK Space Exploration |
ARK Next and ARK Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Next and ARK Space
The main advantage of trading using opposite ARK Next and ARK Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next position performs unexpectedly, ARK Space 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 Space will offset losses from the drop in ARK Space's long position.| ARK Next vs. ARK Autonomous Technology | ARK Next vs. ARK Genomic Revolution | ARK Next vs. ARK Fintech Innovation | ARK Next vs. ARK Innovation ETF |
| ARK Space vs. ARK Autonomous Technology | ARK Space vs. ARK Fintech Innovation | ARK Space vs. ARK Next Generation | ARK Space vs. ARK Genomic Revolution |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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