Correlation Between ARK and Balancer

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

Diversification Opportunities for ARK and Balancer

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ARK and Balancer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ARK and Balancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balancer 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 Balancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balancer has no effect on the direction of ARK i.e., ARK and Balancer go up and down completely randomly.

Pair Corralation between ARK and Balancer

Assuming the 90 days trading horizon ARK is expected to generate 1.58 times more return on investment than Balancer. However, ARK is 1.58 times more volatile than Balancer. It trades about -0.16 of its potential returns per unit of risk. Balancer is currently generating about -0.44 per unit of risk. If you would invest  89.00  in ARK on February 27, 2022 and sell it today you would lose (36.00)  from holding ARK or give up 40.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

ARK  vs.  Balancer

 Performance (%) 
      Timeline 
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

Balancer 
Balancer Performance
0 of 100
Over the last 90 days Balancer 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 Balancer investors.

Balancer Price Channel

ARK and Balancer Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with ARK and Balancer

The main advantage of trading using opposite ARK and Balancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK position performs unexpectedly, Balancer 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 Balancer will offset losses from the drop in Balancer's long position.
The idea behind ARK and Balancer 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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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