Correlation Between ARK Autonomous and KraneShares MSCI

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

Diversification Opportunities for ARK Autonomous and KraneShares MSCI

-0.76

Correlation Coefficient

ARK Autonomous  KraneShares MSCI

Pay attention - limited upside

The 3 months correlation between ARK and KraneShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding ARK Autonomous Technology and KraneShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI China 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 KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI China has no effect on the direction of ARK Autonomous i.e., ARK Autonomous and KraneShares MSCI go up and down completely randomly.

Pair Corralation between ARK Autonomous and KraneShares MSCI

Given the investment horizon of 90 days ARK Autonomous Technology is expected to under-perform the KraneShares MSCI. In addition to that, ARK Autonomous is 1.08 times more volatile than KraneShares MSCI China. It trades about -0.09 of its total potential returns per unit of risk. KraneShares MSCI China is currently generating about 0.12 per unit of volatility. If you would invest  2,266  in KraneShares MSCI China on December 21, 2024 and sell it today you would earn a total of  349.50  from holding KraneShares MSCI China or generate 15.42% return on investment over 90 days.

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

ARK Autonomous Technology  vs.  KraneShares MSCI China

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.

KraneShares MSCI China

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, KraneShares MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARK Autonomous and KraneShares MSCI

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

The idea behind ARK Autonomous Technology and KraneShares MSCI China 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.