Correlation Between My Neighbor and ARK

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

Diversification Opportunities for My Neighbor and ARK

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ALICE and ARK is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding My Neighbor Alice and ARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK and My Neighbor 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 My Neighbor Alice 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 My Neighbor i.e., My Neighbor and ARK go up and down completely randomly.

Pair Corralation between My Neighbor and ARK

Assuming the 90 days trading horizon My Neighbor Alice is expected to generate 1.27 times more return on investment than ARK. However, My Neighbor is 1.27 times more volatile than ARK. It trades about -0.06 of its potential returns per unit of risk. ARK is currently generating about -0.09 per unit of risk. If you would invest  1,191  in My Neighbor Alice on February 21, 2022 and sell it today you would lose (892.00)  from holding My Neighbor Alice or give up 74.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

My Neighbor Alice  vs.  ARK

 Performance (%) 
      Timeline 
My Neighbor Alice 
ALICE Performance
0 of 100
Over the last 90 days My Neighbor Alice has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's fundamental indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for My Neighbor Alice investors.

ALICE Price Channel

ARK 
ARK Performance
0 of 100
Over the last 90 days ARK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for ARK investors.

ARK Price Channel

My Neighbor and ARK Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with My Neighbor and ARK

The main advantage of trading using opposite My Neighbor and ARK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if My Neighbor 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 My Neighbor Alice 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.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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