Correlation Between ARK Fintech and IShares Russell

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

By analyzing existing cross correlation between ARK Fintech Innovation and iShares Russell Mid Cap, you can compare the effects of market volatilities on ARK Fintech and IShares Russell 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 Fintech with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Fintech and IShares Russell.

Diversification Opportunities for ARK Fintech and IShares Russell

0.95

Correlation Coefficient

ARK Fintech  IShares Russell

Almost no diversification

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

Pair Corralation between ARK Fintech and IShares Russell

Given the investment horizon of 90 days ARK Fintech Innovation is expected to under-perform the IShares Russell. In addition to that, ARK Fintech is 1.67 times more volatile than iShares Russell Mid Cap. It trades about -0.21 of its total potential returns per unit of risk. iShares Russell Mid Cap is currently generating about -0.21 per unit of volatility. If you would invest  13,397  in iShares Russell Mid Cap on October 15, 2024 and sell it today you would lose (702.00) from holding iShares Russell Mid Cap or give up 5.24% of portfolio value over 90 days.

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

ARK Fintech Innovation  vs.  iShares Russell Mid Cap

ARK Fintech Innovation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Fintech Innovation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, ARK Fintech reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Russell Mid

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Russell is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ARK Fintech and IShares Russell

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

The idea behind ARK Fintech Innovation and iShares Russell Mid Cap 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.