Correlation Between ARK Next and AdvisorShares

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

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

Diversification Opportunities for ARK Next and AdvisorShares

0.78

Correlation Coefficient

ARK Next  AdvisorShares

Poor diversification

The 3 months correlation between ARK and AdvisorShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and AdvisorShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares and ARK Next 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 Next Generation are associated (or correlated) with AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares has no effect on the direction of ARK Next i.e., ARK Next and AdvisorShares go up and down completely randomly.

Pair Corralation between ARK Next and AdvisorShares

If you would invest  8,013  in ARK Next Generation on September 12, 2024 and sell it today you would earn a total of  3,361  from holding ARK Next Generation or generate 41.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

ARK Next Generation  vs.  AdvisorShares

ARK Next Generation

Risk-Adjusted Performance

23 of 100

Solid

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

AdvisorShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, AdvisorShares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ARK Next and AdvisorShares

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

The idea behind ARK Next Generation and AdvisorShares 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.