Correlation Between ARK Genomic and Direxion Daily

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

By analyzing existing cross correlation between ARK Genomic Revolution and Direxion Daily 20, you can compare the effects of market volatilities on ARK Genomic and Direxion Daily 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 Genomic with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Genomic and Direxion Daily.

Diversification Opportunities for ARK Genomic and Direxion Daily

0.68

Correlation Coefficient

ARK Genomic  Direxion Daily

Poor diversification

The 3 months correlation between ARK and Direxion is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and Direxion Daily 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily 20 and ARK Genomic 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 Genomic Revolution are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily 20 has no effect on the direction of ARK Genomic i.e., ARK Genomic and Direxion Daily go up and down completely randomly.

Pair Corralation between ARK Genomic and Direxion Daily

Given the investment horizon of 90 days ARK Genomic Revolution is expected to generate 0.86 times more return on investment than Direxion Daily. However, ARK Genomic Revolution is 1.16 times less risky than Direxion Daily. It trades about -0.01 of its potential returns per unit of risk. Direxion Daily 20 is currently generating about -0.04 per unit of risk. If you would invest  3,429  in ARK Genomic Revolution on January 25, 2024 and sell it today you would lose (1,031) from holding ARK Genomic Revolution or give up 30.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

ARK Genomic Revolution  vs.  Direxion Daily 20

ARK Genomic Revolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARK Genomic Revolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's forward-looking signals remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Direxion Daily 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily 20 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's primary indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with ARK Genomic and Direxion Daily

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

The idea behind ARK Genomic Revolution and Direxion Daily 20 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.