Correlation Between Innovator Small and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator Small 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 Small 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 Small Cap and First Trust Cboe, you can compare the effects of market volatilities on Innovator Small 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 Small with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Small and First Trust.
Diversification Opportunities for Innovator Small and First Trust
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovator and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Small Cap 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 Small 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 Small Cap 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 Small i.e., Innovator Small and First Trust go up and down completely randomly.
Pair Corralation between Innovator Small and First Trust
Given the investment horizon of 90 days Innovator Small Cap is expected to generate 1.42 times more return on investment than First Trust. However, Innovator Small is 1.42 times more volatile than First Trust Cboe. It trades about 0.17 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.14 per unit of risk. If you would invest 2,493 in Innovator Small Cap on September 5, 2024 and sell it today you would earn a total of 165.00 from holding Innovator Small Cap or generate 6.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 52.0% |
| Values | Daily Returns |
Innovator Small Cap vs. First Trust Cboe
Performance |
| Timeline |
| Innovator Small Cap |
| First Trust Cboe |
Innovator Small and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Small and First Trust
The main advantage of trading using opposite Innovator Small and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Small 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 Small vs. First Trust Cboe | Innovator Small vs. Innovator SP 500 | Innovator Small 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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