Correlation Between Vanguard Mid and ARK Space

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid 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 Mid 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 Mid Cap Growth and ARK Space Exploration, you can compare the effects of market volatilities on Vanguard Mid 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 Mid with a short position of ARK Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and ARK Space.

Diversification Opportunities for Vanguard Mid and ARK Space

0.93

Correlation Coefficient

Vanguard Mid  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 Mid Cap Growth 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 Mid 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 Mid Cap Growth 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 Mid i.e., Vanguard Mid and ARK Space go up and down completely randomly.

Pair Corralation between Vanguard Mid and ARK Space

Considering the 90-day investment horizon Vanguard Mid Cap Growth is expected to generate 0.61 times more return on investment than ARK Space. However, Vanguard Mid Cap Growth is 1.64 times less risky than ARK Space. It trades about -0.03 of its potential returns per unit of risk. ARK Space Exploration is currently generating about -0.04 per unit of risk. If you would invest  25,774  in Vanguard Mid Cap Growth on December 27, 2024 and sell it today you would lose (686.00) from holding Vanguard Mid Cap Growth or give up 2.66% of portfolio value over 90 days.

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

Vanguard Mid Cap Growth  vs.  ARK Space Exploration

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Mid is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Mid and ARK Space

The main advantage of trading using opposite Vanguard Mid and ARK Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid Cap Growth 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.