Correlation Between Tidal Trust and Innovator
Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Innovator 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 Tidal Trust and Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tidal Trust II and Innovator SP 500, you can compare the effects of market volatilities on Tidal Trust and Innovator 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 Tidal Trust with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Innovator.
Diversification Opportunities for Tidal Trust and Innovator
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tidal and Innovator is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 and Tidal Trust 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 Tidal Trust II are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Tidal Trust i.e., Tidal Trust and Innovator go up and down completely randomly.
Pair Corralation between Tidal Trust and Innovator
Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the Innovator. In addition to that, Tidal Trust is 4.84 times more volatile than Innovator SP 500. It trades about -0.09 of its total potential returns per unit of risk. Innovator SP 500 is currently generating about 0.15 per unit of volatility. If you would invest 3,388 in Innovator SP 500 on September 1, 2024 and sell it today you would earn a total of 161.00 from holding Innovator SP 500 or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Tidal Trust II vs. Innovator SP 500
Performance |
| Timeline |
| Tidal Trust II |
| Innovator SP 500 |
Tidal Trust and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tidal Trust and Innovator
The main advantage of trading using opposite Tidal Trust and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator's long position.The idea behind Tidal Trust II and Innovator SP 500 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.| Innovator vs. Innovator ETFs Trust | Innovator vs. First Trust Cboe | Innovator vs. Innovator SP 500 | Innovator vs. Innovator Equity Power |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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