Correlation Between First Trust and ARK Next
Can any of the company-specific risk be diversified away by investing in both First Trust and ARK Next 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 First Trust and ARK Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and ARK Next Generation, you can compare the effects of market volatilities on First Trust and ARK Next 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 First Trust with a short position of ARK Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ARK Next.
Diversification Opportunities for First Trust and ARK Next
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and ARK is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and ARK Next Generation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Next Generation and First Trust 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 First Trust NASDAQ are associated (or correlated) with ARK Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Next Generation has no effect on the direction of First Trust i.e., First Trust and ARK Next go up and down completely randomly.
Pair Corralation between First Trust and ARK Next
Given the investment horizon of 90 days First Trust is expected to generate 4.99 times less return on investment than ARK Next. But when comparing it to its historical volatility, First Trust NASDAQ is 1.84 times less risky than ARK Next. It trades about 0.14 of its potential returns per unit of risk. ARK Next Generation is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 8,850 in ARK Next Generation on August 26, 2024 and sell it today you would earn a total of 1,984 from holding ARK Next Generation or generate 22.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. ARK Next Generation
Performance |
| Timeline |
| First Trust NASDAQ |
| ARK Next Generation |
First Trust and ARK Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ARK Next
The main advantage of trading using opposite First Trust and ARK Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ARK Next 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 Next will offset losses from the drop in ARK Next's long position.| First Trust vs. Amplify ETF Trust | First Trust vs. Global X Cybersecurity | First Trust vs. iShares Cybersecurity and | First Trust vs. First Trust Cloud |
| ARK Next vs. Invesco DWA Utilities | ARK Next vs. Invesco Dynamic Large | ARK Next vs. Invesco Dynamic Large | ARK Next vs. HUMANA INC |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |