Correlation Between Invesco DWA and ARK Genomic

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

By analyzing existing cross correlation between Invesco DWA Consumer and ARK Genomic Revolution, you can compare the effects of market volatilities on Invesco DWA and ARK Genomic 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 Invesco DWA with a short position of ARK Genomic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and ARK Genomic.

Diversification Opportunities for Invesco DWA and ARK Genomic

0.81

Correlation Coefficient

Invesco DWA  ARK Genomic

Very poor diversification

The 3 months correlation between Invesco and ARK is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and ARK Genomic Revolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Genomic Revolution and Invesco DWA 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 Invesco DWA Consumer are associated (or correlated) with ARK Genomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Genomic Revolution has no effect on the direction of Invesco DWA i.e., Invesco DWA and ARK Genomic go up and down completely randomly.

Pair Corralation between Invesco DWA and ARK Genomic

Considering the 90-day investment horizon Invesco DWA Consumer is expected to under-perform the ARK Genomic. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DWA Consumer is 1.65 times less risky than ARK Genomic. The etf trades about -0.08 of its potential returns per unit of risk. The ARK Genomic Revolution is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,466  in ARK Genomic Revolution on December 26, 2024 and sell it today you would lose (117.00) from holding ARK Genomic Revolution or give up 4.74% of portfolio value over 90 days.

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

Invesco DWA Consumer  vs.  ARK Genomic Revolution

Invesco DWA Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

ARK Genomic Revolution

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK Genomic Revolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, ARK Genomic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco DWA and ARK Genomic

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

The idea behind Invesco DWA Consumer and ARK Genomic Revolution 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.