Correlation Between Innovator MSCI and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator MSCI 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 MSCI 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 MSCI EAFE and First Trust Cboe, you can compare the effects of market volatilities on Innovator MSCI 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 MSCI with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator MSCI and First Trust.
Diversification Opportunities for Innovator MSCI and First Trust
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Innovator and First is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Innovator MSCI EAFE 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 MSCI 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 MSCI EAFE 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 MSCI i.e., Innovator MSCI and First Trust go up and down completely randomly.
Pair Corralation between Innovator MSCI and First Trust
Given the investment horizon of 90 days Innovator MSCI EAFE is expected to under-perform the First Trust. In addition to that, Innovator MSCI is 2.0 times more volatile than First Trust Cboe. It trades about -0.06 of its total potential returns per unit of risk. First Trust Cboe is currently generating about 0.24 per unit of volatility. If you would invest 2,948 in First Trust Cboe on September 12, 2024 and sell it today you would earn a total of 131.00 from holding First Trust Cboe or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator MSCI EAFE vs. First Trust Cboe
Performance |
| Timeline |
| Innovator MSCI EAFE |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust Cboe |
Innovator MSCI and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator MSCI and First Trust
The main advantage of trading using opposite Innovator MSCI and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator MSCI 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 MSCI vs. Innovator MSCI Emerging | Innovator MSCI vs. Innovator Russell 2000 | Innovator MSCI vs. Innovator Nasdaq 100 Power |
| First Trust vs. FT Cboe Vest | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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