Correlation Between IShares Technology and ARK Next
Can any of the company-specific risk be diversified away by investing in both IShares Technology 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 IShares Technology and ARK Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Technology ETF and ARK Next Generation, you can compare the effects of market volatilities on IShares Technology 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 IShares Technology with a short position of ARK Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and ARK Next.
Diversification Opportunities for IShares Technology and ARK Next
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and ARK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF 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 IShares Technology 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 iShares Technology ETF 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 IShares Technology i.e., IShares Technology and ARK Next go up and down completely randomly.
Pair Corralation between IShares Technology and ARK Next
Considering the 90-day investment horizon IShares Technology is expected to generate 4.44 times less return on investment than ARK Next. But when comparing it to its historical volatility, iShares Technology ETF is 1.67 times less risky than ARK Next. It trades about 0.11 of its potential returns per unit of risk. ARK Next Generation is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 8,496 in ARK Next Generation on August 26, 2024 and sell it today you would earn a total of 2,338 from holding ARK Next Generation or generate 27.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Technology ETF vs. ARK Next Generation
Performance |
| Timeline |
| iShares Technology ETF |
| ARK Next Generation |
IShares Technology and ARK Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Technology and ARK Next
The main advantage of trading using opposite IShares Technology and ARK Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology 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.| IShares Technology vs. Invesco DWA Utilities | IShares Technology vs. Invesco Dynamic Large | IShares Technology vs. Invesco Dynamic Large | IShares Technology vs. HUMANA INC |
| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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