Correlation Between ARK Next and Defiance Daily

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

Diversification Opportunities for ARK Next and Defiance Daily

-0.77

Correlation Coefficient

ARK Next  Defiance Daily

Pay attention - limited upside

The 3 months correlation between ARK and Defiance is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and Defiance Daily Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Daily Target 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 Defiance Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Daily Target has no effect on the direction of ARK Next i.e., ARK Next and Defiance Daily go up and down completely randomly.

Pair Corralation between ARK Next and Defiance Daily

Given the investment horizon of 90 days ARK Next Generation is expected to generate 0.1 times more return on investment than Defiance Daily. However, ARK Next Generation is 9.56 times less risky than Defiance Daily. It trades about 0.3 of its potential returns per unit of risk. Defiance Daily Target is currently generating about -0.01 per unit of risk. If you would invest  7,648  in ARK Next Generation on September 1, 2024 and sell it today you would earn a total of  3,179  from holding ARK Next Generation or generate 41.57% return on investment over 90 days.

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

ARK Next Generation  vs.  Defiance Daily Target

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.

Defiance Daily Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Defiance Daily Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with ARK Next and Defiance Daily

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

The idea behind ARK Next Generation and Defiance Daily Target 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.