Correlation Between ARK Genomic and ARK Space

Can any of the company-specific risk be diversified away by investing in both ARK Genomic and ARK Space 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 ARK Genomic and ARK Space into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARK Genomic Revolution and ARK Space Exploration, you can compare the effects of market volatilities on ARK Genomic and ARK Space 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 ARK Genomic with a short position of ARK Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Genomic and ARK Space.

Diversification Opportunities for ARK Genomic and ARK Space

0.33

Correlation Coefficient

ARK Genomic  ARK Space

Weak diversification

The 3 months correlation between ARK and ARK is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and ARK Space Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Space Exploration and ARK Genomic 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 ARK Genomic Revolution are associated (or correlated) with ARK Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Space Exploration has no effect on the direction of ARK Genomic i.e., ARK Genomic and ARK Space go up and down completely randomly.

Pair Corralation between ARK Genomic and ARK Space

Given the investment horizon of 90 days ARK Genomic Revolution is expected to under-perform the ARK Space. In addition to that, ARK Genomic is 1.87 times more volatile than ARK Space Exploration. It trades about -0.23 of its total potential returns per unit of risk. ARK Space Exploration is currently generating about 0.03 per unit of volatility. If you would invest  1,462  in ARK Space Exploration on February 2, 2024 and sell it today you would earn a total of  10.00  from holding ARK Space Exploration or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ARK Genomic Revolution  vs.  ARK Space Exploration

ARK Genomic Revolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARK Genomic Revolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's forward-looking signals remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

ARK Space Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Space Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, ARK Space is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ARK Genomic and ARK Space

The main advantage of trading using opposite ARK Genomic and ARK Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Genomic position performs unexpectedly, ARK Space 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 Space will offset losses from the drop in ARK Space's long position.

The idea behind ARK Genomic Revolution and ARK Space Exploration 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.