Correlation Between Arweave and ARK

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

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

Diversification Opportunities for Arweave and ARK

0.58

Correlation Coefficient

Arweave  ARK

Very weak diversification

The 3 months correlation between Arweave and ARK is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arweave and ARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK and Arweave 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 Arweave are associated (or correlated) with ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK has no effect on the direction of Arweave i.e., Arweave and ARK go up and down completely randomly.

Pair Corralation between Arweave and ARK

Assuming the 90 days horizon Arweave is expected to generate 1.35 times more return on investment than ARK. However, Arweave is 1.35 times more volatile than ARK. It trades about -0.11 of its potential returns per unit of risk. ARK is currently generating about -0.2 per unit of risk. If you would invest  4,267  in Arweave on January 26, 2024 and sell it today you would lose (898.00) from holding Arweave or give up 21.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Arweave  vs.  ARK

Arweave

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arweave are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Arweave exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARK

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, ARK may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Arweave and ARK

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

The idea behind Arweave and ARK 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.