Correlation Between First Trust and ARK Genomic
Can any of the company-specific risk be diversified away by investing in both First Trust and ARK Genomic 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 Genomic 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 Genomic Revolution, you can compare the effects of market volatilities on First Trust and ARK Genomic 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 Genomic. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ARK Genomic.
Diversification Opportunities for First Trust and ARK Genomic
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and ARK is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and ARK Genomic Revolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Genomic Revolution 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 Genomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Genomic Revolution has no effect on the direction of First Trust i.e., First Trust and ARK Genomic go up and down completely randomly.
Pair Corralation between First Trust and ARK Genomic
Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the ARK Genomic. But the etf apears to be less risky and, when comparing its historical volatility, First Trust NASDAQ is 1.05 times less risky than ARK Genomic. The etf trades about -0.12 of its potential returns per unit of risk. The ARK Genomic Revolution is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 2,297 in ARK Genomic Revolution on January 11, 2025 and sell it today you would lose (241.00) from holding ARK Genomic Revolution or give up 10.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. ARK Genomic Revolution
Performance |
| Timeline |
| First Trust NASDAQ |
| ARK Genomic Revolution |
First Trust and ARK Genomic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ARK Genomic
The main advantage of trading using opposite First Trust and ARK Genomic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ARK Genomic 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 Genomic will offset losses from the drop in ARK Genomic's long position.| First Trust vs. First Trust Dow | First Trust vs. ARK Autonomous Technology | First Trust vs. First Trust S Network | First Trust vs. FT Vest Equity |
| ARK Genomic vs. Strategy Shares | ARK Genomic vs. Freedom Day Dividend | ARK Genomic vs. Franklin Templeton ETF | ARK Genomic vs. iShares MSCI China |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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