Correlation Between VictoryShares THB and ARK Innovation

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

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

Diversification Opportunities for VictoryShares THB and ARK Innovation

-0.12

Correlation Coefficient

VictoryShares THB  ARK Innovation

Good diversification

The 3 months correlation between VictoryShares and ARK is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares THB Mid and ARK Innovation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Innovation ETF and VictoryShares THB 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 VictoryShares THB Mid are associated (or correlated) with ARK Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Innovation ETF has no effect on the direction of VictoryShares THB i.e., VictoryShares THB and ARK Innovation go up and down completely randomly.

Pair Corralation between VictoryShares THB and ARK Innovation

Given the investment horizon of 90 days VictoryShares THB Mid is expected to under-perform the ARK Innovation. But the etf apears to be less risky and, when comparing its historical volatility, VictoryShares THB Mid is 2.79 times less risky than ARK Innovation. The etf trades about -0.02 of its potential returns per unit of risk. The ARK Innovation ETF is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,576  in ARK Innovation ETF on October 23, 2024 and sell it today you would earn a total of  1,385  from holding ARK Innovation ETF or generate 30.27% return on investment over 90 days.

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

VictoryShares THB Mid  vs.  ARK Innovation ETF

VictoryShares THB Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

ARK Innovation ETF

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Innovation ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ARK Innovation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VictoryShares THB and ARK Innovation

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

The idea behind VictoryShares THB Mid and ARK Innovation 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.