Correlation Between Innovator Buffer and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator Buffer 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 Innovator Buffer and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Buffer Step Up and First Trust Exchange Traded, you can compare the effects of market volatilities on Innovator Buffer 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 Innovator Buffer with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Buffer and First Trust.
Diversification Opportunities for Innovator Buffer and First Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Buffer Step Up and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Innovator Buffer 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 Innovator Buffer Step Up 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 Exchange has no effect on the direction of Innovator Buffer i.e., Innovator Buffer and First Trust go up and down completely randomly.
Pair Corralation between Innovator Buffer and First Trust
Given the investment horizon of 90 days Innovator Buffer Step Up is expected to generate 3.12 times more return on investment than First Trust. However, Innovator Buffer is 3.12 times more volatile than First Trust Exchange Traded. It trades about 0.18 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.27 per unit of risk. If you would invest 3,350 in Innovator Buffer Step Up on September 13, 2024 and sell it today you would earn a total of 39.00 from holding Innovator Buffer Step Up or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Innovator Buffer Step Up vs. First Trust Exchange Traded
Performance |
| Timeline |
| Innovator Buffer Step |
| First Trust Exchange |
Innovator Buffer and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Buffer and First Trust
The main advantage of trading using opposite Innovator Buffer and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Buffer 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.| Innovator Buffer vs. First Trust Cboe | Innovator Buffer vs. FT Cboe Vest | Innovator Buffer vs. Innovator SP 500 | Innovator Buffer vs. Innovator SP 500 |
| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Cboe | First Trust vs. FT Cboe Vest | First Trust vs. First Trust Exchange Traded |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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