Correlation Between Alphabet and ARK Autonomous

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

By analyzing existing cross correlation between Alphabet Inc Class C and ARK Autonomous Technology, you can compare the effects of market volatilities on Alphabet and ARK Autonomous 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 Alphabet with a short position of ARK Autonomous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and ARK Autonomous.

Diversification Opportunities for Alphabet and ARK Autonomous

0.92

Correlation Coefficient

Alphabet  ARK Autonomous

Almost no diversification

The 3 months correlation between Alphabet and ARK is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and ARK Autonomous Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Autonomous Technology and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with ARK Autonomous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Autonomous Technology has no effect on the direction of Alphabet i.e., Alphabet and ARK Autonomous go up and down completely randomly.

Pair Corralation between Alphabet and ARK Autonomous

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the ARK Autonomous. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.2 times less risky than ARK Autonomous. The stock trades about -0.13 of its potential returns per unit of risk. The ARK Autonomous Technology is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  7,855  in ARK Autonomous Technology on December 28, 2024 and sell it today you would lose (1,157) from holding ARK Autonomous Technology or give up 14.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Alphabet Inc Class C  vs.  ARK Autonomous Technology

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ARK Autonomous Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Autonomous Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Etf's forward-looking signals remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Alphabet and ARK Autonomous

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

The idea behind Alphabet Inc Class C and ARK Autonomous Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.