Correlation Between MicroSectors FANG and Innovator Hedged
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Innovator Hedged 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 MicroSectors FANG and Innovator Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Innovator Hedged Nasdaq 100, you can compare the effects of market volatilities on MicroSectors FANG and Innovator Hedged 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 MicroSectors FANG with a short position of Innovator Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Innovator Hedged.
Diversification Opportunities for MicroSectors FANG and Innovator Hedged
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MicroSectors and Innovator is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Innovator Hedged Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Hedged Nasdaq and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with Innovator Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Hedged Nasdaq has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Innovator Hedged go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Innovator Hedged
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 6.9 times more return on investment than Innovator Hedged. However, MicroSectors FANG is 6.9 times more volatile than Innovator Hedged Nasdaq 100. It trades about 0.11 of its potential returns per unit of risk. Innovator Hedged Nasdaq 100 is currently generating about 0.11 per unit of risk. If you would invest 6,079 in MicroSectors FANG Index on September 3, 2024 and sell it today you would earn a total of 46,337 from holding MicroSectors FANG Index or generate 762.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 14.75% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Innovator Hedged Nasdaq 100
Performance |
| Timeline |
| MicroSectors FANG Index |
| Innovator Hedged Nasdaq |
MicroSectors FANG and Innovator Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Innovator Hedged
The main advantage of trading using opposite MicroSectors FANG and Innovator Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Innovator Hedged 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 Hedged will offset losses from the drop in Innovator Hedged's long position.| MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. MicroSectors Solactive FANG | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Technology |
| Innovator Hedged vs. Core Alternative ETF | Innovator Hedged vs. Aptus Drawdown Managed | Innovator Hedged vs. Amplify BlackSwan Growth | Innovator Hedged vs. Invesco 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |