Correlation Between ARK Innovation and Vulcan Value

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

Diversification Opportunities for ARK Innovation and Vulcan Value

0.9

Correlation Coefficient

ARK Innovation  Vulcan Value

Almost no diversification

The 3 months correlation between ARK and Vulcan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ARK Innovation ETF and Vulcan Value Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Value Partners 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 Vulcan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Value Partners has no effect on the direction of ARK Innovation i.e., ARK Innovation and Vulcan Value go up and down completely randomly.

Pair Corralation between ARK Innovation and Vulcan Value

Given the investment horizon of 90 days ARK Innovation ETF is expected to under-perform the Vulcan Value. In addition to that, ARK Innovation is 2.79 times more volatile than Vulcan Value Partners. It trades about -0.08 of its total potential returns per unit of risk. Vulcan Value Partners is currently generating about -0.04 per unit of volatility. If you would invest  1,205  in Vulcan Value Partners on December 26, 2024 and sell it today you would lose (37.00) from holding Vulcan Value Partners or give up 3.07% of portfolio value over 90 days.

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

ARK Innovation ETF  vs.  Vulcan Value Partners

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.

Vulcan Value Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Value Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vulcan Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ARK Innovation and Vulcan Value

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

The idea behind ARK Innovation ETF and Vulcan Value Partners 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.