Correlation Between ARK and Bitcoin

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

Diversification Opportunities for ARK and Bitcoin

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between ARK and Bitcoin is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ARK and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin 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 Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of ARK i.e., ARK and Bitcoin go up and down completely randomly.

Pair Corralation between ARK and Bitcoin

Assuming the 90 days trading horizon ARK is expected to under-perform the Bitcoin. In addition to that, ARK is 1.53 times more volatile than Bitcoin. It trades about -0.09 of its total potential returns per unit of risk. Bitcoin is currently generating about 0.07 per unit of volatility. If you would invest  952,375  in Bitcoin on February 20, 2022 and sell it today you would earn a total of  1,968,445  from holding Bitcoin or generate 206.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy29.77%
ValuesDaily Returns

ARK  vs.  Bitcoin

 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

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

Bitcoin Price Channel

ARK and Bitcoin Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with ARK and Bitcoin

The main advantage of trading using opposite ARK and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK position performs unexpectedly, Bitcoin 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 Bitcoin will offset losses from the drop in Bitcoin's long position.
The idea behind ARK and Bitcoin 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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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