Correlation Between ARK and BORA

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Can any of the company-specific risk be diversified away by investing in both ARK and BORA 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 BORA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARK and BORA, you can compare the effects of market volatilities on ARK and BORA 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 BORA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK and BORA.

Diversification Opportunities for ARK and BORA

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ARK and BORA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ARK and BORA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORA 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 BORA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORA has no effect on the direction of ARK i.e., ARK and BORA go up and down completely randomly.

Pair Corralation between ARK and BORA

Assuming the 90 days trading horizon ARK is expected to generate 1.05 times more return on investment than BORA. However, ARK is 1.05 times more volatile than BORA. It trades about 0.18 of its potential returns per unit of risk. BORA is currently generating about 0.17 per unit of risk. If you would invest  87.00  in ARK on December 30, 2023 and sell it today you would earn a total of  22.00  from holding ARK or generate 25.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ARK  vs.  BORA

 Performance 
       Timeline  
ARK 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ARK are ranked lower than 7 (%) 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.
BORA 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BORA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BORA exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARK and BORA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ARK and BORA

The main advantage of trading using opposite ARK and BORA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK position performs unexpectedly, BORA 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 BORA will offset losses from the drop in BORA's long position.
The idea behind ARK and BORA 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.
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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