Correlation Between ARK Next and PIMCO 25

Can any of the company-specific risk be diversified away by investing in both ARK Next and PIMCO 25 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 PIMCO 25 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 PIMCO 25 Year, you can compare the effects of market volatilities on ARK Next and PIMCO 25 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 PIMCO 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and PIMCO 25.

Diversification Opportunities for ARK Next and PIMCO 25

-0.51

Correlation Coefficient

ARK Next  PIMCO 25

Excellent diversification

The 3 months correlation between ARK and PIMCO is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and PIMCO 25 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 25 Year 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 PIMCO 25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 25 Year has no effect on the direction of ARK Next i.e., ARK Next and PIMCO 25 go up and down completely randomly.

Pair Corralation between ARK Next and PIMCO 25

Given the investment horizon of 90 days ARK Next Generation is expected to under-perform the PIMCO 25. In addition to that, ARK Next is 2.07 times more volatile than PIMCO 25 Year. It trades about -0.04 of its total potential returns per unit of risk. PIMCO 25 Year is currently generating about 0.03 per unit of volatility. If you would invest  6,837  in PIMCO 25 Year on December 27, 2024 and sell it today you would earn a total of  117.00  from holding PIMCO 25 Year or generate 1.71% return on investment over 90 days.

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

ARK Next Generation  vs.  PIMCO 25 Year

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 latest weak performance, the Etf's forward-looking signals remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

PIMCO 25 Year

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 25 Year are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO 25 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ARK Next and PIMCO 25

The main advantage of trading using opposite ARK Next and PIMCO 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next position performs unexpectedly, PIMCO 25 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 PIMCO 25 will offset losses from the drop in PIMCO 25's long position.

The idea behind ARK Next Generation and PIMCO 25 Year 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.