Correlation Between ARK Space and Direxion

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

Diversification Opportunities for ARK Space and Direxion

0.46

Correlation Coefficient

ARK Space  Direxion

Very weak diversification

The 3 months correlation between ARK and Direxion is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ARK Space Exploration and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of ARK Space i.e., ARK Space and Direxion go up and down completely randomly.

Pair Corralation between ARK Space and Direxion

If you would invest  1,574  in ARK Space Exploration on September 21, 2024 and sell it today you would earn a total of  379.00  from holding ARK Space Exploration or generate 24.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	3.13%
Values	Daily Returns

ARK Space Exploration  vs.  Direxion

ARK Space Exploration

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Space Exploration are ranked lower than 17 (%) 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.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ARK Space and Direxion

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

The idea behind ARK Space Exploration and Direxion 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.