Correlation Between ARK Israel and ARK Space

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

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

Diversification Opportunities for ARK Israel and ARK Space

0.95

Correlation Coefficient

ARK Israel  ARK Space

Almost no diversification

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

Pair Corralation between ARK Israel and ARK Space

Given the investment horizon of 90 days ARK Israel is expected to generate 1.53 times less return on investment than ARK Space. But when comparing it to its historical volatility, ARK Israel Innovative is 1.15 times less risky than ARK Space. It trades about 0.16 of its potential returns per unit of risk. ARK Space Exploration is currently generating about 0.22 of returns per unit of risk over similar time horizon. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

ARK Israel Innovative  vs.  ARK Space Exploration

ARK Israel Innovative

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Israel Innovative are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, ARK Israel disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with ARK Israel and ARK Space

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

The idea behind ARK Israel Innovative and ARK Space Exploration 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.