Correlation Between ARK Next and First Trust
Can any of the company-specific risk be diversified away by investing in both ARK Next and First Trust 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 Next and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARK Next Generation and First Trust NASDAQ, you can compare the effects of market volatilities on ARK Next and First Trust 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 Next with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Next and First Trust.
Diversification Opportunities for ARK Next and First Trust
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARK and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ARK Next Generation and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and ARK Next 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 Next Generation are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of ARK Next i.e., ARK Next and First Trust go up and down completely randomly.
Pair Corralation between ARK Next and First Trust
Given the investment horizon of 90 days ARK Next Generation is expected to generate 1.17 times more return on investment than First Trust. However, ARK Next is 1.17 times more volatile than First Trust NASDAQ. It trades about 0.21 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.11 per unit of risk. If you would invest 12,988 in ARK Next Generation on June 12, 2025 and sell it today you would earn a total of 2,987 from holding ARK Next Generation or generate 23.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARK Next Generation vs. First Trust NASDAQ
Performance |
| Timeline |
| ARK Next Generation |
| First Trust NASDAQ |
ARK Next and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARK Next and First Trust
The main advantage of trading using opposite ARK Next and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Next position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| ARK Next vs. ARK Autonomous Technology | ARK Next vs. ARK Genomic Revolution | ARK Next vs. ARK Fintech Innovation | ARK Next vs. ARK Innovation ETF |
| First Trust vs. Financial Select Sector | First Trust vs. Vanguard Financials Index | First Trust vs. SPDR SP Regional | First Trust vs. SPDR SP Bank |
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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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