Correlation Between ARK Next and Technology Select
Can any of the company-specific risk be diversified away by investing in both ARK Next and Technology Select 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 Technology Select 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 Technology Select Sector, you can compare the effects of market volatilities on ARK Next and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and Technology Select.
Diversification Opportunities for ARK Next and Technology Select
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARK and Technology is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of ARK Next i.e., ARK Next and Technology Select go up and down completely randomly.
Pair Corralation between ARK Next and Technology Select
Given the investment horizon of 90 days ARK Next Generation is expected to generate 2.04 times more return on investment than Technology Select. However, ARK Next is 2.04 times more volatile than Technology Select Sector. It trades about 0.53 of its potential returns per unit of risk. Technology Select Sector is currently generating about 0.25 per unit of risk. If you would invest 8,662 in ARK Next Generation on September 5, 2024 and sell it today you would earn a total of 2,468 from holding ARK Next Generation or generate 28.49% 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. Technology Select Sector
Performance |
| Timeline |
| ARK Next Generation |
| Technology Select Sector |
ARK Next and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Next and Technology Select
The main advantage of trading using opposite ARK Next and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next position performs unexpectedly, Technology Select 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 Technology Select will offset losses from the drop in Technology Select's long position.| ARK Next vs. Technology Select Sector | ARK Next vs. iShares Technology ETF | ARK Next vs. VanEck Semiconductor ETF | ARK Next vs. iShares Semiconductor ETF |
| Technology Select vs. iShares Exponential Technologies | Technology Select vs. ALPS Disruptive Technologies | Technology Select vs. Fidelity MSCI Information | Technology Select vs. iShares Expanded Tech |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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