Correlation Between Technology Select and ARK Next
Can any of the company-specific risk be diversified away by investing in both Technology Select 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 Technology Select and ARK Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Select Sector and ARK Next Generation, you can compare the effects of market volatilities on Technology Select 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 Technology Select with a short position of ARK Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and ARK Next.
Diversification Opportunities for Technology Select and ARK Next
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Technology and ARK is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector 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 Technology Select 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 Technology Select Sector 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 Technology Select i.e., Technology Select and ARK Next go up and down completely randomly.
Pair Corralation between Technology Select and ARK Next
Considering the 90-day investment horizon Technology Select is expected to generate 3.74 times less return on investment than ARK Next. But when comparing it to its historical volatility, Technology Select Sector is 1.48 times less risky than ARK Next. It trades about 0.06 of its potential returns per unit of risk. ARK Next Generation is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 10,474 in ARK Next Generation on November 18, 2024 and sell it today you would earn a total of 2,090 from holding ARK Next Generation or generate 19.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. ARK Next Generation
Performance |
| Timeline |
| Technology Select Sector |
| ARK Next Generation |
Technology Select and ARK Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and ARK Next
The main advantage of trading using opposite Technology Select and ARK Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select 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.| Technology Select vs. First Trust Technology | Technology Select vs. Fidelity MSCI Information | Technology Select vs. First Trust Nasdaq | Technology Select vs. iShares Expanded Tech Software |
| ARK Next vs. ARK Autonomous Technology | ARK Next vs. ARK Genomic Revolution | ARK Next vs. ARK Fintech Innovation | ARK Next vs. ARK Innovation ETF |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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