Correlation Between ARK Next and JP Morgan

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

Diversification Opportunities for ARK Next and JP Morgan

0.95

Correlation Coefficient

ARK Next  JP Morgan

Almost no diversification

The 3 months correlation between ARK and JCTR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange 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 JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of ARK Next i.e., ARK Next and JP Morgan go up and down completely randomly.

Pair Corralation between ARK Next and JP Morgan

Given the investment horizon of 90 days ARK Next Generation is expected to generate 2.94 times more return on investment than JP Morgan. However, ARK Next is 2.94 times more volatile than JP Morgan Exchange Traded. It trades about 0.34 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about 0.16 per unit of risk. If you would invest  8,719  in ARK Next Generation on September 13, 2024 and sell it today you would earn a total of  3,000  from holding ARK Next Generation or generate 34.41% return on investment over 90 days.

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

ARK Next Generation  vs.  JP Morgan Exchange Traded

ARK Next Generation

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Next Generation are ranked lower than 25 (%) 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.

JP Morgan Exchange

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Exchange Traded are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, JP Morgan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ARK Next and JP Morgan

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

The idea behind ARK Next Generation and JP Morgan Exchange Traded 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.