Correlation Between First Trust and Innovator
Can any of the company-specific risk be diversified away by investing in both First 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 First Trust and Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SkyBridge and Innovator SP 500, you can compare the effects of market volatilities on First 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 First Trust with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Innovator.
Diversification Opportunities for First Trust and Innovator
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Innovator is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge 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 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 SkyBridge 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 First Trust i.e., First Trust and Innovator go up and down completely randomly.
Pair Corralation between First Trust and Innovator
Given the investment horizon of 90 days First Trust SkyBridge is expected to generate 13.36 times more return on investment than Innovator. However, First Trust is 13.36 times more volatile than Innovator SP 500. It trades about 0.09 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.13 per unit of risk. If you would invest 1,330 in First Trust SkyBridge on August 24, 2024 and sell it today you would earn a total of 631.00 from holding First Trust SkyBridge or generate 47.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SkyBridge vs. Innovator SP 500
Performance |
| Timeline |
| First Trust SkyBridge |
| Innovator SP 500 |
First Trust and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Innovator
The main advantage of trading using opposite First Trust and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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.| First Trust vs. VanEck Digital Transformation | First Trust vs. Bitwise Crypto Industry | First Trust vs. Global X Blockchain | First Trust vs. First Trust Indxx |
| Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator 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 CEOs Directory module to screen CEOs from public companies around the world.
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