Correlation Between ARK Next and Schwab Long

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

Diversification Opportunities for ARK Next and Schwab Long

-0.11

Correlation Coefficient

ARK Next  Schwab Long

Good diversification

The 3 months correlation between ARK and Schwab is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and Schwab Long Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Long Term 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 Schwab Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Long Term has no effect on the direction of ARK Next i.e., ARK Next and Schwab Long go up and down completely randomly.

Pair Corralation between ARK Next and Schwab Long

Given the investment horizon of 90 days ARK Next Generation is expected to under-perform the Schwab Long. In addition to that, ARK Next is 2.48 times more volatile than Schwab Long Term Treasury. It trades about -0.29 of its total potential returns per unit of risk. Schwab Long Term Treasury is currently generating about 0.27 per unit of volatility. If you would invest  3,167  in Schwab Long Term Treasury on December 1, 2024 and sell it today you would earn a total of  148.00  from holding Schwab Long Term Treasury or generate 4.67% return on investment over 90 days.

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

ARK Next Generation  vs.  Schwab Long Term Treasury

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.

Schwab Long Term

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Long Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Schwab Long is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ARK Next and Schwab Long

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

The idea behind ARK Next Generation and Schwab Long Term Treasury 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.