Correlation Between SPDR SP and ARK Space

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

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

Diversification Opportunities for SPDR SP and ARK Space

0.99

Correlation Coefficient

SPDR SP  ARK Space

No risk reduction

The 3 months correlation between SPDR and ARK is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Kensho 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 SPDR SP 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 SPDR SP Kensho 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 SPDR SP i.e., SPDR SP and ARK Space go up and down completely randomly.

Pair Corralation between SPDR SP and ARK Space

Given the investment horizon of 90 days SPDR SP is expected to generate 1.41 times less return on investment than ARK Space. But when comparing it to its historical volatility, SPDR SP Kensho is 1.17 times less risky than ARK Space. It trades about 0.24 of its potential returns per unit of risk. ARK Space Exploration is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,505  in ARK Space Exploration on September 12, 2024 and sell it today you would earn a total of  444.00  from holding ARK Space Exploration or generate 29.5% return on investment over 90 days.

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

SPDR SP Kensho  vs.  ARK Space Exploration

SPDR SP Kensho

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

ARK Space Exploration

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Space Exploration are ranked lower than 22 (%) 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 SPDR SP and ARK Space

The main advantage of trading using opposite SPDR SP and ARK Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Kensho 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.