Correlation Between ARK Genomic and IShares Biotechnology

Can any of the company-specific risk be diversified away by investing in both ARK Genomic and IShares Biotechnology 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 Genomic and IShares Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARK Genomic Revolution and iShares Biotechnology ETF, you can compare the effects of market volatilities on ARK Genomic and IShares Biotechnology 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 Genomic with a short position of IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Genomic and IShares Biotechnology.

Diversification Opportunities for ARK Genomic and IShares Biotechnology

0.89

Correlation Coefficient

ARK Genomic  IShares Biotechnology

Very poor diversification

The 3 months correlation between ARK and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and iShares Biotechnology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Biotechnology ETF and ARK Genomic 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 Genomic Revolution are associated (or correlated) with IShares Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Biotechnology ETF has no effect on the direction of ARK Genomic i.e., ARK Genomic and IShares Biotechnology go up and down completely randomly.

Pair Corralation between ARK Genomic and IShares Biotechnology

Given the investment horizon of 90 days ARK Genomic Revolution is expected to generate 1.68 times more return on investment than IShares Biotechnology. However, ARK Genomic is 1.68 times more volatile than iShares Biotechnology ETF. It trades about 0.11 of its potential returns per unit of risk. iShares Biotechnology ETF is currently generating about 0.16 per unit of risk. If you would invest  2,034  in ARK Genomic Revolution on May 6, 2025 and sell it today you would earn a total of  322.00  from holding ARK Genomic Revolution or generate 15.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ARK Genomic Revolution  vs.  iShares Biotechnology ETF

ARK Genomic Revolution

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Genomic Revolution are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, ARK Genomic reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Biotechnology ETF

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Biotechnology ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, IShares Biotechnology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARK Genomic and IShares Biotechnology

The main advantage of trading using opposite ARK Genomic and IShares Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Genomic position performs unexpectedly, IShares Biotechnology 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 IShares Biotechnology will offset losses from the drop in IShares Biotechnology's long position.

The idea behind ARK Genomic Revolution and iShares Biotechnology 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.