Correlation Between ARK Next and RiverFront Dynamic

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

Diversification Opportunities for ARK Next and RiverFront Dynamic

0.96

Correlation Coefficient

ARK Next  RiverFront Dynamic

Almost no diversification

The 3 months correlation between ARK and RiverFront is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and RiverFront Dynamic Flex Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic Flex 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 RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic Flex has no effect on the direction of ARK Next i.e., ARK Next and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between ARK Next and RiverFront Dynamic

Given the investment horizon of 90 days ARK Next Generation is expected to under-perform the RiverFront Dynamic. In addition to that, ARK Next is 2.82 times more volatile than RiverFront Dynamic Flex Cap. It trades about -0.04 of its total potential returns per unit of risk. RiverFront Dynamic Flex Cap is currently generating about -0.05 per unit of volatility. If you would invest  5,900  in RiverFront Dynamic Flex Cap on December 26, 2024 and sell it today you would lose (166.00) from holding RiverFront Dynamic Flex Cap or give up 2.81% of portfolio value over 90 days.

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

ARK Next Generation  vs.  RiverFront Dynamic Flex Cap

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.

RiverFront Dynamic Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days RiverFront Dynamic Flex Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ARK Next and RiverFront Dynamic

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

The idea behind ARK Next Generation and RiverFront Dynamic Flex Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.