Correlation Between ARK and BEZ

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

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

Diversification Opportunities for ARK and BEZ

-0.21

Correlation Coefficient

ARK  BEZ

Very good diversification

The 3 months correlation between ARK and BEZ is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ARK and BEZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEZ and ARK 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 are associated (or correlated) with BEZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEZ has no effect on the direction of ARK i.e., ARK and BEZ go up and down completely randomly.

Pair Corralation between ARK and BEZ

If you would invest  24.00  in BEZ on January 20, 2024 and sell it today you would earn a total of  0.00  from holding BEZ or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

ARK  vs.  BEZ

ARK

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, ARK exhibited solid returns over the last few months and may actually be approaching a breakup point.

BEZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BEZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BEZ is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ARK and BEZ

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

The idea behind ARK and BEZ 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.