Correlation Between Global X and ARK Genomic

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

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

Diversification Opportunities for Global X and ARK Genomic

0.42

Correlation Coefficient

Global X  ARK Genomic

Very weak diversification

The 3 months correlation between Global and ARK is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Global X Renewable 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 Global X 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 Global X Renewable 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 Global X i.e., Global X and ARK Genomic go up and down completely randomly.

Pair Corralation between Global X and ARK Genomic

Given the investment horizon of 90 days Global X Renewable is expected to under-perform the ARK Genomic. But the etf apears to be less risky and, when comparing its historical volatility, Global X Renewable is 2.02 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 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,525  in ARK Genomic Revolution on September 2, 2024 and sell it today you would earn a total of  73.00  from holding ARK Genomic Revolution or generate 2.89% return on investment over 90 days.

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

Global X Renewable  vs.  ARK Genomic Revolution

Global X Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Genomic Revolution

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Genomic Revolution are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Global X and ARK Genomic

The main advantage of trading using opposite Global X and ARK Genomic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Renewable 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.