Correlation Between ARK Genomic and IShares Genomics

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

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

Diversification Opportunities for ARK Genomic and IShares Genomics

0.67

Correlation Coefficient

ARK Genomic  IShares Genomics

Poor diversification

The 3 months correlation between ARK and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and iShares Genomics Immunology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Genomics Imm and ARK Genomic 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 Genomic Revolution are associated (or correlated) with IShares Genomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Genomics Imm has no effect on the direction of ARK Genomic i.e., ARK Genomic and IShares Genomics go up and down completely randomly.

Pair Corralation between ARK Genomic and IShares Genomics

Given the investment horizon of 90 days ARK Genomic Revolution is expected to generate 2.25 times more return on investment than IShares Genomics. However, ARK Genomic is 2.25 times more volatile than iShares Genomics Immunology. It trades about -0.03 of its potential returns per unit of risk. iShares Genomics Immunology is currently generating about -0.09 per unit of risk. If you would invest  2,443  in ARK Genomic Revolution on December 27, 2024 and sell it today you would lose (194.00) from holding ARK Genomic Revolution or give up 7.94% of portfolio value over 90 days.

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

ARK Genomic Revolution  vs.  iShares Genomics Immunology

ARK Genomic Revolution

Risk-Adjusted Performance

Very Weak

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

iShares Genomics Imm

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Genomics Immunology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ARK Genomic and IShares Genomics

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

The idea behind ARK Genomic Revolution and iShares Genomics Immunology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.