ARKK vs. HYG: What’s The Difference?

The ARK Innovation ETF (ARKK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. ARKK is a ARK ETF Trust Mid-Cap Growth fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between ARKK and HYG? And which fund is better?

The expense ratio of ARKK is 0.27 percentage points higher than HYG’s (0.75% vs. 0.48%). ARKK also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, ARKK has provided higher returns than HYG over the past 5 years.

In this article, we’ll compare ARKK vs. HYG. We’ll look at performance and holdings, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss ARKK’s and HYG’s risk metrics, portfolio growth, and fund composition and examine how these affect their overall returns.

Summary

ARKK HYG
Name ARK Innovation ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Mid-Cap Growth High Yield Bond
Issuer ARK ETF Trust iShares
AUM 25.52B 20.03B
Avg. Return 55.45% 6.42%
Div. Yield 0.0% 4.44%
Expense Ratio 0.75% 0.48%

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

ARKK’s dividend yield is 4.44% lower than that of HYG (0.0% vs. 4.44%). Also, ARKK yielded on average 49.03% more per year over the past decade (55.45% vs. 6.42%). The expense ratio of ARKK is 0.27 percentage points higher than HYG’s (0.75% vs. 0.48%).

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Fund Composition

Holdings

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

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Risk Analysis

ARKK HYG
Mean Return 0 0.46
R-squared 0 4.1
Std. Deviation 0 6.96
Alpha 0 3.58
Beta 0 0.48
Sharpe Ratio 0 0.7
Treynor Ratio 0 10.01

The ARK Innovation ETF (ARKK) has a R-squared of 0 with a Beta of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while ARKK’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Alpha of 0.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a R-squared of 4.1 with a Alpha of 3.58 and a Standard Deviation of 6.96. Its Sharpe Ratio is 0.7 while HYG’s Treynor Ratio is 10.01. Furthermore, the fund has a Mean Return of 0.46 and a Beta of 0.48.

ARKK’s Mean Return is 0.46 points lower than that of HYG and its R-squared is 4.10 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than HYG. The Alpha and Beta of ARKK are 3.58 points lower and 0.48 points lower than HYG’s Alpha and Beta.

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Performance

Annual Returns

ARKK vs. HYG - Annual Returns

Year ARKK HYG
2020 152.52% 4.12%
2019 35.73% 14.23%
2018 3.58% -1.93%
2017 87.38% 6.09%
2016 -1.96% 13.92%
2015 3.76% -5.55%
2014 0.0% 2.0%
2013 0.0% 5.9%
2012 0.0% 13.83%
2011 0.0% 5.89%
2010 0.0% 12.07%

ARKK had its best year in 2020 with an annual return of 152.52%. ARKK’s worst year over the past decade yielded -1.96% and occurred in 2016. In most years the ARK Innovation ETF provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 3.58% respectively.

The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

ARKK vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
ARKK $10,000 $65,218 55.45%
HYG $10,000 $14,096 6.42%

A $10,000 investment in ARKK would have resulted in a final balance of $65,218. This is a profit of $55,218 over 5 years and amounts to a compound annual growth rate (CAGR) of 55.45%.

With a $10,000 investment in HYG, the end total would have been $14,096. This equates to a $4,096 profit over 5 years and a compound annual growth rate (CAGR) of 6.42%.

ARKK’s CAGR is 49.03 percentage points higher than that of HYG and as a result, would have yielded $51,122 more on a $10,000 investment. Thus, ARKK outperformed HYG by 49.03% annually.


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