Correlation Between Innovator Premium and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator Premium and First Trust 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 Innovator Premium and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Premium Income and First Trust Cboe, you can compare the effects of market volatilities on Innovator Premium and First Trust 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 Innovator Premium with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Premium and First Trust.
Diversification Opportunities for Innovator Premium and First Trust
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Premium Income and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Innovator Premium 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 Innovator Premium Income are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Cboe has no effect on the direction of Innovator Premium i.e., Innovator Premium and First Trust go up and down completely randomly.
Pair Corralation between Innovator Premium and First Trust
Given the investment horizon of 90 days Innovator Premium is expected to generate 2.14 times less return on investment than First Trust. But when comparing it to its historical volatility, Innovator Premium Income is 3.7 times less risky than First Trust. It trades about 0.4 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,049 in First Trust Cboe on September 12, 2024 and sell it today you would earn a total of 30.00 from holding First Trust Cboe or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Innovator Premium Income vs. First Trust Cboe
Performance |
| Timeline |
| Innovator Premium Income |
| First Trust Cboe |
Innovator Premium and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Premium and First Trust
The main advantage of trading using opposite Innovator Premium and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Premium position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Innovator Premium vs. Innovator ETFs Trust | Innovator Premium vs. First Trust Cboe | Innovator Premium vs. FT Cboe Vest | Innovator Premium vs. Innovator SP 500 |
| First Trust vs. Innovator ETFs Trust | First Trust vs. FT Cboe Vest | First Trust vs. Innovator SP 500 | First Trust 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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