Correlation Between First Trust and Innovator Growth
Can any of the company-specific risk be diversified away by investing in both First Trust and Innovator Growth 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 First Trust and Innovator Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Cboe and Innovator Growth 100 Power, you can compare the effects of market volatilities on First Trust and Innovator Growth 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 First Trust with a short position of Innovator Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Innovator Growth.
Diversification Opportunities for First Trust and Innovator Growth
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Innovator is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cboe and Innovator Growth 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Growth 100 and First 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 First Trust Cboe are associated (or correlated) with Innovator Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Growth 100 has no effect on the direction of First Trust i.e., First Trust and Innovator Growth go up and down completely randomly.
Pair Corralation between First Trust and Innovator Growth
Given the investment horizon of 90 days First Trust is expected to generate 1.03 times less return on investment than Innovator Growth. But when comparing it to its historical volatility, First Trust Cboe is 1.45 times less risky than Innovator Growth. It trades about 0.19 of its potential returns per unit of risk. Innovator Growth 100 Power is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,032 in Innovator Growth 100 Power on August 28, 2024 and sell it today you would earn a total of 82.00 from holding Innovator Growth 100 Power or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Cboe vs. Innovator Growth 100 Power
Performance |
| Timeline |
| First Trust Cboe |
| Innovator Growth 100 |
First Trust and Innovator Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Innovator Growth
The main advantage of trading using opposite First Trust and Innovator Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Innovator Growth 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 Growth will offset losses from the drop in Innovator Growth's long position.| First Trust vs. FT Cboe Vest | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
| Innovator Growth vs. Innovator Nasdaq 100 Power | Innovator Growth vs. Innovator Nasdaq 100 Power | Innovator Growth vs. Innovator SP 500 | Innovator Growth vs. Innovator SP 500 |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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