Correlation Between ARK Space and SPDR Kensho

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

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

Diversification Opportunities for ARK Space and SPDR Kensho

0.88

Correlation Coefficient

ARK Space  SPDR Kensho

Very poor diversification

The 3 months correlation between ARK and SPDR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ARK Space Exploration and SPDR Kensho New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho New and ARK Space 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 Space Exploration are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho New has no effect on the direction of ARK Space i.e., ARK Space and SPDR Kensho go up and down completely randomly.

Pair Corralation between ARK Space and SPDR Kensho

Given the investment horizon of 90 days ARK Space Exploration is expected to generate 1.05 times more return on investment than SPDR Kensho. However, ARK Space is 1.05 times more volatile than SPDR Kensho New. It trades about 0.11 of its potential returns per unit of risk. SPDR Kensho New is currently generating about 0.09 per unit of risk. If you would invest  1,336  in ARK Space Exploration on October 1, 2024 and sell it today you would earn a total of  680.00  from holding ARK Space Exploration or generate 50.9% return on investment over 90 days.

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

ARK Space Exploration  vs.  SPDR Kensho New

ARK Space Exploration

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Space Exploration are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, ARK Space showed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Kensho New

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho New are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, SPDR Kensho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ARK Space and SPDR Kensho

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

The idea behind ARK Space Exploration and SPDR Kensho New 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.