Correlation Between Dow Jones and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Innovator Equity 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 Dow Jones and Innovator Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Innovator Equity Managed, you can compare the effects of market volatilities on Dow Jones and Innovator Equity 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 Dow Jones with a short position of Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Innovator Equity.
Diversification Opportunities for Dow Jones and Innovator Equity
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Innovator is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Innovator Equity Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Managed and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Managed has no effect on the direction of Dow Jones i.e., Dow Jones and Innovator Equity go up and down completely randomly.
Pair Corralation between Dow Jones and Innovator Equity
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.29 times more return on investment than Innovator Equity. However, Dow Jones is 1.29 times more volatile than Innovator Equity Managed. It trades about 0.16 of its potential returns per unit of risk. Innovator Equity Managed is currently generating about 0.14 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Innovator Equity Managed
Performance |
| Timeline |
Dow Jones and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Innovator Equity Managed
Pair trading matchups for Innovator Equity
Pair Trading with Dow Jones and Innovator Equity
The main advantage of trading using opposite Dow Jones and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Innovator Equity 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 Equity will offset losses from the drop in Innovator Equity's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Innovator Equity vs. Innovator ETFs Trust | Innovator Equity vs. First Trust Cboe | Innovator Equity vs. Innovator SP 500 | Innovator Equity 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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