Correlation Between ARK Genomic and ARK Fintech

Can any of the company-specific risk be diversified away by investing in both ARK Genomic and ARK Fintech 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 Fintech 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 Fintech Innovation, you can compare the effects of market volatilities on ARK Genomic and ARK Fintech 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 Fintech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Genomic and ARK Fintech.

Diversification Opportunities for ARK Genomic and ARK Fintech

-0.34

Correlation Coefficient

ARK Genomic  ARK Fintech

Very good diversification

The 3 months correlation between ARK and ARK is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and ARK Fintech Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Fintech Innovation 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 Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Fintech Innovation has no effect on the direction of ARK Genomic i.e., ARK Genomic and ARK Fintech go up and down completely randomly.

Pair Corralation between ARK Genomic and ARK Fintech

Given the investment horizon of 90 days ARK Genomic Revolution is expected to under-perform the ARK Fintech. In addition to that, ARK Genomic is 1.33 times more volatile than ARK Fintech Innovation. It trades about -0.01 of its total potential returns per unit of risk. ARK Fintech Innovation is currently generating about 0.29 per unit of volatility. If you would invest  2,830  in ARK Fintech Innovation on August 30, 2024 and sell it today you would earn a total of  1,093  from holding ARK Fintech Innovation or generate 38.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ARK Genomic Revolution  vs.  ARK Fintech Innovation

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 nearly stable forward-looking signals, ARK Genomic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ARK Fintech Innovation

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Fintech Innovation are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, ARK Fintech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARK Genomic and ARK Fintech

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

The idea behind ARK Genomic Revolution and ARK Fintech Innovation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.