Correlation Between ARK Autonomous and Technology Select

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

Diversification Opportunities for ARK Autonomous and Technology Select

0.84

Correlation Coefficient

ARK Autonomous  Technology Select

Very poor diversification

The 3 months correlation between ARK and Technology is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ARK Autonomous Technology and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of ARK Autonomous i.e., ARK Autonomous and Technology Select go up and down completely randomly.

Pair Corralation between ARK Autonomous and Technology Select

Given the investment horizon of 90 days ARK Autonomous Technology is expected to generate 1.71 times more return on investment than Technology Select. However, ARK Autonomous is 1.71 times more volatile than Technology Select Sector. It trades about 0.17 of its potential returns per unit of risk. Technology Select Sector is currently generating about 0.09 per unit of risk. If you would invest  7,447  in ARK Autonomous Technology on September 28, 2024 and sell it today you would earn a total of  555.50  from holding ARK Autonomous Technology or generate 7.46% return on investment over 90 days.

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

ARK Autonomous Technology  vs.  Technology Select Sector

ARK Autonomous Technology

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Autonomous Technology are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward-looking signals, ARK Autonomous reported solid returns over the last few months and may actually be approaching a breakup point.

Technology Select Sector

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ARK Autonomous and Technology Select

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

The idea behind ARK Autonomous Technology and Technology Select Sector 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.