Correlation Between ARK Next and FlexShares STOXX
Can any of the company-specific risk be diversified away by investing in both ARK Next and FlexShares STOXX 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 FlexShares STOXX 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 FlexShares STOXX ESG, you can compare the effects of market volatilities on ARK Next and FlexShares STOXX 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 FlexShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and FlexShares STOXX.
Diversification Opportunities for ARK Next and FlexShares STOXX
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARK and FlexShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and FlexShares STOXX ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX ESG 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 FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX ESG has no effect on the direction of ARK Next i.e., ARK Next and FlexShares STOXX go up and down completely randomly.
Pair Corralation between ARK Next and FlexShares STOXX
Given the investment horizon of 90 days ARK Next Generation is expected to generate 2.78 times more return on investment than FlexShares STOXX. However, ARK Next is 2.78 times more volatile than FlexShares STOXX ESG. It trades about 0.08 of its potential returns per unit of risk. FlexShares STOXX ESG is currently generating about 0.11 per unit of risk. If you would invest 5,179 in ARK Next Generation on December 4, 2024 and sell it today you would earn a total of 5,208 from holding ARK Next Generation or generate 100.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARK Next Generation vs. FlexShares STOXX ESG
Performance |
| Timeline |
| ARK Next Generation |
| FlexShares STOXX ESG |
ARK Next and FlexShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Next and FlexShares STOXX
The main advantage of trading using opposite ARK Next and FlexShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next position performs unexpectedly, FlexShares STOXX 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 FlexShares STOXX will offset losses from the drop in FlexShares STOXX'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 |
| FlexShares STOXX vs. iShares ESG Aware | FlexShares STOXX vs. FlexShares STOXX Global | FlexShares STOXX vs. iShares ESG Aware | FlexShares STOXX vs. iShares ESG Aware |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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