Correlation Between ARK Innovation and Alexis Practical

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

By analyzing existing cross correlation between ARK Innovation ETF and Alexis Practical Tactical, you can compare the effects of market volatilities on ARK Innovation and Alexis Practical 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 Innovation with a short position of Alexis Practical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Innovation and Alexis Practical.

Diversification Opportunities for ARK Innovation and Alexis Practical

0.89

Correlation Coefficient

ARK Innovation  Alexis Practical

Very poor diversification

The 3 months correlation between ARK and Alexis is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ARK Innovation ETF and Alexis Practical Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexis Practical Tactical and ARK Innovation 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 Innovation ETF are associated (or correlated) with Alexis Practical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexis Practical Tactical has no effect on the direction of ARK Innovation i.e., ARK Innovation and Alexis Practical go up and down completely randomly.

Pair Corralation between ARK Innovation and Alexis Practical

Given the investment horizon of 90 days ARK Innovation ETF is expected to generate 3.91 times more return on investment than Alexis Practical. However, ARK Innovation is 3.91 times more volatile than Alexis Practical Tactical. It trades about 0.16 of its potential returns per unit of risk. Alexis Practical Tactical is currently generating about 0.03 per unit of risk. If you would invest  4,745  in ARK Innovation ETF on September 24, 2024 and sell it today you would earn a total of  1,195  from holding ARK Innovation ETF or generate 25.18% return on investment over 90 days.

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

ARK Innovation ETF  vs.  Alexis Practical Tactical

ARK Innovation ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Innovation ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ARK Innovation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alexis Practical Tactical

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alexis Practical Tactical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Alexis Practical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ARK Innovation and Alexis Practical

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

The idea behind ARK Innovation ETF and Alexis Practical Tactical 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.