Correlation Between ARK Next and CVS Health
Can any of the company-specific risk be diversified away by investing in both ARK Next and CVS Health 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 Next and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARK Next Generation and CVS Health Corp, you can compare the effects of market volatilities on ARK Next and CVS Health 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 Next with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and CVS Health.
Diversification Opportunities for ARK Next and CVS Health
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ARK and CVS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and ARK Next 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 Next Generation are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of ARK Next i.e., ARK Next and CVS Health go up and down completely randomly.
Pair Corralation between ARK Next and CVS Health
Given the investment horizon of 90 days ARK Next Generation is expected to generate 1.46 times more return on investment than CVS Health. However, ARK Next is 1.46 times more volatile than CVS Health Corp. It trades about 0.07 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.07 per unit of risk. If you would invest 7,002 in ARK Next Generation on January 26, 2024 and sell it today you would earn a total of 590.00 from holding ARK Next Generation or generate 8.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.41% |
Values | Daily Returns |
ARK Next Generation vs. CVS Health Corp
Performance |
Timeline |
ARK Next Generation |
CVS Health Corp |
ARK Next and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ARK Next and CVS Health
The main advantage of trading using opposite ARK Next and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.ARK Next vs. OShares Quality Dividend | ARK Next vs. Aquagold International | ARK Next vs. Morningstar Unconstrained Allocation | ARK Next vs. High Yield Municipal Fund |
CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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