Correlation Between ARK Next and United States

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

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

Diversification Opportunities for ARK Next and United States

0.27

Correlation Coefficient

ARK Next  United States

Modest diversification

The 3 months correlation between ARK and United is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and United States Brent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Brent and ARK Next 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 Next Generation are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Brent has no effect on the direction of ARK Next i.e., ARK Next and United States go up and down completely randomly.

Pair Corralation between ARK Next and United States

Given the investment horizon of 90 days ARK Next is expected to generate 1.95 times less return on investment than United States. In addition to that, ARK Next is 1.27 times more volatile than United States Brent. It trades about 0.11 of its total potential returns per unit of risk. United States Brent is currently generating about 0.26 per unit of volatility. If you would invest  2,935  in United States Brent on October 26, 2024 and sell it today you would earn a total of  236.00  from holding United States Brent or generate 8.04% return on investment over 90 days.

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

ARK Next Generation  vs.  United States Brent

ARK Next Generation

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Next Generation are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, ARK Next showed solid returns over the last few months and may actually be approaching a breakup point.

United States Brent

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Brent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ARK Next and United States

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

The idea behind ARK Next Generation and United States Brent 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.