Correlation Between ARK Innovation and Roundhill Investments

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

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

Diversification Opportunities for ARK Innovation and Roundhill Investments

0.0

Correlation Coefficient

ARK Innovation  Roundhill Investments

Pay attention - limited upside

The 3 months correlation between ARK and Roundhill is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ARK Innovation ETF and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments and ARK Innovation 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 Innovation ETF are associated (or correlated) with Roundhill Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Investments has no effect on the direction of ARK Innovation i.e., ARK Innovation and Roundhill Investments go up and down completely randomly.

Pair Corralation between ARK Innovation and Roundhill Investments

If you would invest (100.00) in Roundhill Investments on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Roundhill Investments or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

ARK Innovation ETF  vs.  Roundhill Investments

ARK Innovation ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Innovation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Roundhill Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roundhill Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Roundhill Investments is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ARK Innovation and Roundhill Investments

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

The idea behind ARK Innovation ETF and Roundhill Investments 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.