Correlation Between Vulcan Value and ARK Innovation

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

By analyzing existing cross correlation between Vulcan Value Partners and ARK Innovation ETF, you can compare the effects of market volatilities on Vulcan Value and ARK Innovation 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 Vulcan Value with a short position of ARK Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Value and ARK Innovation.

Diversification Opportunities for Vulcan Value and ARK Innovation

0.69

Correlation Coefficient

Vulcan Value  ARK Innovation

Poor diversification

The 3 months correlation between Vulcan and ARK is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Value Partners and ARK Innovation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Innovation ETF and Vulcan Value 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 Vulcan Value Partners are associated (or correlated) with ARK Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Innovation ETF has no effect on the direction of Vulcan Value i.e., Vulcan Value and ARK Innovation go up and down completely randomly.

Pair Corralation between Vulcan Value and ARK Innovation

Assuming the 90 days horizon Vulcan Value is expected to generate 3.59 times less return on investment than ARK Innovation. But when comparing it to its historical volatility, Vulcan Value Partners is 2.42 times less risky than ARK Innovation. It trades about 0.06 of its potential returns per unit of risk. ARK Innovation ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,513  in ARK Innovation ETF on September 24, 2024 and sell it today you would earn a total of  1,427  from holding ARK Innovation ETF or generate 31.62% return on investment over 90 days.

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

Vulcan Value Partners  vs.  ARK Innovation ETF

Vulcan Value Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Value Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Vulcan Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ARK Innovation ETF

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Vulcan Value and ARK Innovation

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

The idea behind Vulcan Value Partners and ARK Innovation ETF 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.