Correlation Between SPDR SP and ARK Innovation
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and ARK Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and ARK Innovation ETF, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of ARK Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and ARK Innovation.
Diversification Opportunities for SPDR SP and ARK Innovation
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SPDR and ARK is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 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 SPDR SP 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 SPDR SP 400 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 SPDR SP i.e., SPDR SP and ARK Innovation go up and down completely randomly.
Pair Corralation between SPDR SP and ARK Innovation
Given the investment horizon of 90 days SPDR SP is expected to generate 2.22 times less return on investment than ARK Innovation. But when comparing it to its historical volatility, SPDR SP 400 is 2.24 times less risky than ARK Innovation. It trades about 0.06 of its potential returns per unit of risk. ARK Innovation ETF is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,929 in ARK Innovation ETF on November 19, 2024 and sell it today you would earn a total of 2,773 from holding ARK Innovation ETF or generate 70.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 400 vs. ARK Innovation ETF
Performance |
| Timeline |
| SPDR SP 400 |
| ARK Innovation ETF |
SPDR SP and ARK Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and ARK Innovation
The main advantage of trading using opposite SPDR SP and ARK Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.The idea behind SPDR SP 400 and ARK Innovation ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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