Correlation Between ARK Autonomous and IShares Semiconductor

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

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

Diversification Opportunities for ARK Autonomous and IShares Semiconductor

-0.55

Correlation Coefficient

ARK Autonomous  IShares Semiconductor

Excellent diversification

The 3 months correlation between ARK and IShares is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ARK Autonomous Technology and iShares Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Semiconductor ETF and ARK Autonomous 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 Autonomous Technology are associated (or correlated) with IShares Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Semiconductor ETF has no effect on the direction of ARK Autonomous i.e., ARK Autonomous and IShares Semiconductor go up and down completely randomly.

Pair Corralation between ARK Autonomous and IShares Semiconductor

Given the investment horizon of 90 days ARK Autonomous Technology is expected to generate 0.96 times more return on investment than IShares Semiconductor. However, ARK Autonomous Technology is 1.04 times less risky than IShares Semiconductor. It trades about 0.26 of its potential returns per unit of risk. iShares Semiconductor ETF is currently generating about -0.03 per unit of risk. If you would invest  5,883  in ARK Autonomous Technology on September 22, 2024 and sell it today you would earn a total of  1,925  from holding ARK Autonomous Technology or generate 32.72% return on investment over 90 days.

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

ARK Autonomous Technology  vs.  iShares Semiconductor ETF

ARK Autonomous Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Autonomous Technology are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, ARK Autonomous reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Semiconductor ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Semiconductor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ARK Autonomous and IShares Semiconductor

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

The idea behind ARK Autonomous Technology and iShares Semiconductor ETF 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.