Correlation Between ARK Autonomous and ARK Next

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

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

Diversification Opportunities for ARK Autonomous and ARK Next

0.93

Correlation Coefficient

ARK Autonomous  ARK Next

Almost no diversification

The 3 months correlation between ARK and ARK is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ARK Autonomous Technology and ARK Next Generation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Next Generation and ARK Autonomous 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 Autonomous Technology are associated (or correlated) with ARK Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Next Generation has no effect on the direction of ARK Autonomous i.e., ARK Autonomous and ARK Next go up and down completely randomly.

Pair Corralation between ARK Autonomous and ARK Next

Given the investment horizon of 90 days ARK Autonomous Technology is expected to under-perform the ARK Next. But the etf apears to be less risky and, when comparing its historical volatility, ARK Autonomous Technology is 1.15 times less risky than ARK Next. The etf trades about -0.07 of its potential returns per unit of risk. The ARK Next Generation is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  11,448  in ARK Next Generation on December 26, 2024 and sell it today you would lose (865.00) from holding ARK Next Generation or give up 7.56% of portfolio value over 90 days.

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

ARK Autonomous Technology  vs.  ARK Next Generation

ARK Autonomous Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Autonomous Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Etf's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

ARK Next Generation

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Next Generation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking signals, ARK Next is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ARK Autonomous and ARK Next

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

The idea behind ARK Autonomous Technology and ARK Next Generation 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.