Correlation Between ARK Autonomous and First Trust

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

Diversification Opportunities for ARK Autonomous and First Trust

0.54

Correlation Coefficient

ARK Autonomous  First Trust

Very weak diversification

The 3 months correlation between ARK and First is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ARK Autonomous Technology and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of ARK Autonomous i.e., ARK Autonomous and First Trust go up and down completely randomly.

Pair Corralation between ARK Autonomous and First Trust

Given the investment horizon of 90 days ARK Autonomous Technology is expected to generate 1.16 times more return on investment than First Trust. However, ARK Autonomous is 1.16 times more volatile than First Trust NASDAQ. It trades about -0.17 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about -0.21 per unit of risk. If you would invest  7,796  in ARK Autonomous Technology on December 11, 2024 and sell it today you would lose (1,140) from holding ARK Autonomous Technology or give up 14.62% of portfolio value over 90 days.

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

ARK Autonomous Technology  vs.  First Trust NASDAQ

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 fragile performance in the last few months, the Etf's forward-looking signals remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

First Trust NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with ARK Autonomous and First Trust

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

The idea behind ARK Autonomous Technology and First Trust NASDAQ 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.