Correlation Between ARK Fintech and Invesco NASDAQ

Can any of the company-specific risk be diversified away by investing in both ARK Fintech and Invesco NASDAQ 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 Invesco NASDAQ 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 Invesco NASDAQ 100, you can compare the effects of market volatilities on ARK Fintech and Invesco NASDAQ 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 Invesco NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Fintech and Invesco NASDAQ.

Diversification Opportunities for ARK Fintech and Invesco NASDAQ

0.79

Correlation Coefficient

ARK Fintech  Invesco NASDAQ

Poor diversification

The 3 months correlation between ARK and Invesco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ARK Fintech Innovation and Invesco NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ 100 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 Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ 100 has no effect on the direction of ARK Fintech i.e., ARK Fintech and Invesco NASDAQ go up and down completely randomly.

Pair Corralation between ARK Fintech and Invesco NASDAQ

Given the investment horizon of 90 days ARK Fintech Innovation is expected to generate 1.86 times more return on investment than Invesco NASDAQ. However, ARK Fintech is 1.86 times more volatile than Invesco NASDAQ 100. It trades about -0.02 of its potential returns per unit of risk. Invesco NASDAQ 100 is currently generating about -0.09 per unit of risk. If you would invest  3,892  in ARK Fintech Innovation on December 25, 2024 and sell it today you would lose (197.00) from holding ARK Fintech Innovation or give up 5.06% of portfolio value over 90 days.

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

ARK Fintech Innovation  vs.  Invesco NASDAQ 100

ARK Fintech Innovation

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Fintech Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, ARK Fintech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with ARK Fintech and Invesco NASDAQ

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

The idea behind ARK Fintech Innovation and Invesco NASDAQ 100 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.