Correlation Between ARK Next and American Century
Can any of the company-specific risk be diversified away by investing in both ARK Next 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 Next 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 Next Generation and American Century Quality, you can compare the effects of market volatilities on ARK Next 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 Next with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and American Century.
Diversification Opportunities for ARK Next and American Century
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ARK and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and American Century Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Quality 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 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 Quality has no effect on the direction of ARK Next i.e., ARK Next and American Century go up and down completely randomly.
Pair Corralation between ARK Next and American Century
Given the investment horizon of 90 days ARK Next Generation is expected to generate 4.54 times more return on investment than American Century. However, ARK Next is 4.54 times more volatile than American Century Quality. It trades about 0.15 of its potential returns per unit of risk. American Century Quality is currently generating about 0.24 per unit of risk. If you would invest 7,540 in ARK Next Generation on September 1, 2024 and sell it today you would earn a total of 3,287 from holding ARK Next Generation or generate 43.59% 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. American Century Quality
Performance |
| Timeline |
| ARK Next Generation |
| American Century Quality |
ARK Next and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Next and American Century
The main advantage of trading using opposite ARK Next and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next 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 Next vs. ARK Autonomous Technology | ARK Next vs. ARK Genomic Revolution | ARK Next vs. ARK Fintech Innovation | ARK Next vs. ARK Innovation ETF |
| American Century vs. American Century ETF | American Century vs. American Century Quality | American Century vs. Rareview Dynamic Fixed | American Century vs. First Trust Exchange |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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