Correlation Between Ark Innovation and Adobe Systems

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

Diversification Opportunities for Ark Innovation and Adobe Systems

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ark Innovation and Adobe is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ark Innovation ETF and Adobe Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems and Ark Innovation 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 Innovation ETF are associated (or correlated) with Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of Ark Innovation i.e., Ark Innovation and Adobe Systems go up and down completely randomly.

Pair Corralation between Ark Innovation and Adobe Systems

Given the investment horizon of 90 days Ark Innovation ETF is expected to under-perform the Adobe Systems. In addition to that, Ark Innovation is 1.43 times more volatile than Adobe Systems. It trades about -0.04 of its total potential returns per unit of risk. Adobe Systems is currently generating about -0.04 per unit of volatility. If you would invest  50,216  in Adobe Systems on July 1, 2022 and sell it today you would lose (22,076)  from holding Adobe Systems or give up 43.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ark Innovation ETF  vs.  Adobe Systems

 Performance (%) 
       Timeline  
Ark Innovation ETF 
Ark Innovation Performance
0 of 100
Over the last 90 days Ark Innovation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Ark Innovation is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Ark Innovation Price Channel

Adobe Systems 
Adobe Performance
0 of 100
Over the last 90 days Adobe Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Adobe Price Channel

Ark Innovation and Adobe Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ark Innovation and Adobe Systems

The main advantage of trading using opposite Ark Innovation and Adobe Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Innovation position performs unexpectedly, Adobe Systems 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 Adobe Systems will offset losses from the drop in Adobe Systems' long position.
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The idea behind Ark Innovation ETF and Adobe Systems 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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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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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