Correlation Between Etho Climate and ARK Innovation

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Etho Climate and ARK Innovation 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 Etho Climate and ARK Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etho Climate Leadership and ARK Innovation ETF, you can compare the effects of market volatilities on Etho Climate and ARK Innovation 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 Etho Climate with a short position of ARK Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etho Climate and ARK Innovation.

Diversification Opportunities for Etho Climate and ARK Innovation

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Etho Climate and ARK Innovation is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Etho Climate Leadership and ARK Innovation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Innovation ETF and Etho Climate 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 Etho Climate Leadership are associated (or correlated) with ARK Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Innovation ETF has no effect on the direction of Etho Climate i.e., Etho Climate and ARK Innovation go up and down completely randomly.

Pair Corralation between Etho Climate and ARK Innovation

Given the investment horizon of 90 days Etho Climate Leadership is expected to generate 0.39 times more return on investment than ARK Innovation. However, Etho Climate Leadership is 2.55 times less risky than ARK Innovation. It trades about 0.0 of its potential returns per unit of risk. ARK Innovation ETF is currently generating about -0.06 per unit of risk. If you would invest  5,183  in Etho Climate Leadership on September 9, 2022 and sell it today you would lose (81.00)  from holding Etho Climate Leadership or give up 1.56% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Etho Climate Leadership  vs.  ARK Innovation ETF

 Performance (%) 
       Timeline  
Etho Climate Leadership 
Etho Climate Performance
0 of 100
Over the last 90 days Etho Climate Leadership has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Etho Climate is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Etho Climate Price Channel

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 weak performance in the last few months, the Etf's forward-looking signals remain fairly strong which may send shares a bit higher in January 2023. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

ARK Innovation Price Channel

Etho Climate and ARK Innovation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Etho Climate and ARK Innovation

The main advantage of trading using opposite Etho Climate and ARK Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etho Climate position performs unexpectedly, ARK Innovation 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 Innovation will offset losses from the drop in ARK Innovation's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Etho Climate as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Etho Climate's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Etho Climate's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Etho Climate Leadership.
The idea behind Etho Climate Leadership and ARK Innovation ETF 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against ARK Innovation as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. ARK Innovation's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, ARK Innovation's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to ARK Innovation ETF.
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

Other Complementary Tools

Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Equity Valuation
Check real value of public entities based on technical and fundamental data
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go