Correlation Between Innovator Russell and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator Russell 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 Russell 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 Russell 2000 and First Trust Cboe, you can compare the effects of market volatilities on Innovator Russell 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 Russell with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Russell and First Trust.
Diversification Opportunities for Innovator Russell and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovator and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 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 Russell 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 Russell 2000 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 Russell i.e., Innovator Russell and First Trust go up and down completely randomly.
Pair Corralation between Innovator Russell and First Trust
Given the investment horizon of 90 days Innovator Russell 2000 is expected to generate 2.3 times more return on investment than First Trust. However, Innovator Russell is 2.3 times more volatile than First Trust Cboe. It trades about 0.18 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.24 per unit of risk. If you would invest 3,165 in Innovator Russell 2000 on September 12, 2024 and sell it today you would earn a total of 242.00 from holding Innovator Russell 2000 or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator Russell 2000 vs. First Trust Cboe
Performance |
| Timeline |
| Innovator Russell 2000 |
| First Trust Cboe |
Innovator Russell and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Russell and First Trust
The main advantage of trading using opposite Innovator Russell and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Russell 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 Russell vs. Innovator ETFs Trust | Innovator Russell vs. First Trust Cboe | Innovator Russell vs. FT Cboe Vest | Innovator Russell vs. Innovator SP 500 |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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