Correlation Between First Trust and ARK Innovation
Can any of the company-specific risk be diversified away by investing in both First Trust and ARK Innovation 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 Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Equity and ARK Innovation ETF, you can compare the effects of market volatilities on First Trust and ARK Innovation 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 Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ARK Innovation.
Diversification Opportunities for First Trust and ARK Innovation
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and ARK is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Equity and ARK Innovation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Innovation ETF 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 Equity are associated (or correlated) with ARK Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Innovation ETF has no effect on the direction of First Trust i.e., First Trust and ARK Innovation go up and down completely randomly.
Pair Corralation between First Trust and ARK Innovation
Considering the 90-day investment horizon First Trust Equity is expected to generate 0.93 times more return on investment than ARK Innovation. However, First Trust Equity is 1.07 times less risky than ARK Innovation. It trades about 0.31 of its potential returns per unit of risk. ARK Innovation ETF is currently generating about 0.23 per unit of risk. If you would invest 12,195 in First Trust Equity on November 8, 2024 and sell it today you would earn a total of 1,387 from holding First Trust Equity or generate 11.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Trust Equity vs. ARK Innovation ETF
Performance |
| Timeline |
| First Trust Equity |
| ARK Innovation ETF |
First Trust and ARK Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ARK Innovation
The main advantage of trading using opposite First Trust and ARK Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ARK Innovation 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 Innovation will offset losses from the drop in ARK Innovation's long position.| First Trust vs. Invesco SP Spin Off | First Trust vs. Renaissance IPO ETF | First Trust vs. First Trust NYSE | First Trust vs. Invesco BuyBack Achievers |
| ARK Innovation vs. iShares Dividend and | ARK Innovation vs. Martin Currie Sustainable | ARK Innovation vs. VictoryShares THB Mid | ARK Innovation vs. Mast Global Battery |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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