Correlation Between ARK Israel and VanEck Israel

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

By analyzing existing cross correlation between ARK Israel Innovative and VanEck Israel ETF, you can compare the effects of market volatilities on ARK Israel and VanEck Israel 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 Israel with a short position of VanEck Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Israel and VanEck Israel.

Diversification Opportunities for ARK Israel and VanEck Israel

0.96

Correlation Coefficient

ARK Israel  VanEck Israel

Almost no diversification

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

Pair Corralation between ARK Israel and VanEck Israel

Given the investment horizon of 90 days ARK Israel is expected to generate 1.09 times less return on investment than VanEck Israel. In addition to that, ARK Israel is 1.36 times more volatile than VanEck Israel ETF. It trades about 0.09 of its total potential returns per unit of risk. VanEck Israel ETF is currently generating about 0.14 per unit of volatility. If you would invest  3,901  in VanEck Israel ETF on August 30, 2024 and sell it today you would earn a total of  361.00  from holding VanEck Israel ETF or generate 9.25% return on investment over 90 days.

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

ARK Israel Innovative  vs.  VanEck Israel ETF

ARK Israel Innovative

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Israel Innovative are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ARK Israel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

VanEck Israel ETF

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Israel ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, VanEck Israel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with ARK Israel and VanEck Israel

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

The idea behind ARK Israel Innovative and VanEck Israel ETF 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.