Correlation Between ARK Genomic and SPDR SP

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

Diversification Opportunities for ARK Genomic and SPDR SP

0.82

Correlation Coefficient

ARK Genomic  SPDR SP

Very poor diversification

The 3 months correlation between ARK and SPDR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and SPDR SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Biotech 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Biotech has no effect on the direction of ARK Genomic i.e., ARK Genomic and SPDR SP go up and down completely randomly.

Pair Corralation between ARK Genomic and SPDR SP

Given the investment horizon of 90 days ARK Genomic Revolution is expected to generate 2.14 times more return on investment than SPDR SP. However, ARK Genomic is 2.14 times more volatile than SPDR SP Biotech. It trades about -0.03 of its potential returns per unit of risk. SPDR SP Biotech is currently generating about -0.09 per unit of risk. If you would invest  2,466  in ARK Genomic Revolution on December 26, 2024 and sell it today you would lose (217.00) from holding ARK Genomic Revolution or give up 8.8% of portfolio value over 90 days.

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

ARK Genomic Revolution  vs.  SPDR SP Biotech

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 latest weak performance, the Etf's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

SPDR SP Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with ARK Genomic and SPDR SP

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

The idea behind ARK Genomic Revolution and SPDR SP Biotech 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.