Correlation Between FT Cboe and Innovator Growth
Can any of the company-specific risk be diversified away by investing in both FT Cboe 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 FT Cboe and Innovator Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Cboe Vest and Innovator Growth 100 Power, you can compare the effects of market volatilities on FT Cboe 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 FT Cboe with a short position of Innovator Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Innovator Growth.
Diversification Opportunities for FT Cboe and Innovator Growth
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DNOV and Innovator is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest 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 FT Cboe 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 FT Cboe Vest 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 FT Cboe i.e., FT Cboe and Innovator Growth go up and down completely randomly.
Pair Corralation between FT Cboe and Innovator Growth
Given the investment horizon of 90 days FT Cboe is expected to generate 1.05 times less return on investment than Innovator Growth. But when comparing it to its historical volatility, FT Cboe Vest is 2.9 times less risky than Innovator Growth. It trades about 0.33 of its potential returns per unit of risk. Innovator Growth 100 Power is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,952 in Innovator Growth 100 Power on August 28, 2024 and sell it today you would earn a total of 162.00 from holding Innovator Growth 100 Power or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT Cboe Vest vs. Innovator Growth 100 Power
Performance |
| Timeline |
| FT Cboe Vest |
| Innovator Growth 100 |
FT Cboe and Innovator Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT Cboe and Innovator Growth
The main advantage of trading using opposite FT Cboe and Innovator Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe 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.The idea behind FT Cboe Vest and Innovator Growth 100 Power 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 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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