Correlation Between Vanguard and ARK Space

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

By analyzing existing cross correlation between Vanguard SP Mid Cap and ARK Space Exploration, you can compare the effects of market volatilities on Vanguard and ARK Space 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 Vanguard with a short position of ARK Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and ARK Space.

Diversification Opportunities for Vanguard and ARK Space

0.93

Correlation Coefficient

Vanguard  ARK Space

Almost no diversification

The 3 months correlation between Vanguard and ARK is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap and ARK Space Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Space Exploration and Vanguard 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 Vanguard SP Mid Cap are associated (or correlated) with ARK Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Space Exploration has no effect on the direction of Vanguard i.e., Vanguard and ARK Space go up and down completely randomly.

Pair Corralation between Vanguard and ARK Space

Given the investment horizon of 90 days Vanguard SP Mid Cap is expected to under-perform the ARK Space. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard SP Mid Cap is 1.66 times less risky than ARK Space. The etf trades about -0.09 of its potential returns per unit of risk. The ARK Space Exploration is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,969  in ARK Space Exploration on December 28, 2024 and sell it today you would lose (113.00) from holding ARK Space Exploration or give up 5.74% of portfolio value over 90 days.

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

Vanguard SP Mid Cap  vs.  ARK Space Exploration

Vanguard SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

ARK Space Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Space Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, ARK Space is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard and ARK Space

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

The idea behind Vanguard SP Mid Cap and ARK Space Exploration 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.