Correlation Between First Trust and Innovator Small
Can any of the company-specific risk be diversified away by investing in both First Trust and Innovator Small 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 First Trust and Innovator Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Multi Manager and Innovator Small Cap, you can compare the effects of market volatilities on First Trust and Innovator Small 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 First Trust with a short position of Innovator Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Innovator Small.
Diversification Opportunities for First Trust and Innovator Small
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Innovator is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Manager and Innovator Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Small Cap and First Trust 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 First Trust Multi Manager are associated (or correlated) with Innovator Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Small Cap has no effect on the direction of First Trust i.e., First Trust and Innovator Small go up and down completely randomly.
Pair Corralation between First Trust and Innovator Small
Given the investment horizon of 90 days First Trust Multi Manager is expected to generate 2.24 times more return on investment than Innovator Small. However, First Trust is 2.24 times more volatile than Innovator Small Cap. It trades about 0.11 of its potential returns per unit of risk. Innovator Small Cap is currently generating about 0.18 per unit of risk. If you would invest 1,921 in First Trust Multi Manager on September 1, 2024 and sell it today you would earn a total of 346.00 from holding First Trust Multi Manager or generate 18.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 50.79% |
| Values | Daily Returns |
First Trust Multi Manager vs. Innovator Small Cap
Performance |
| Timeline |
| First Trust Multi |
| Innovator Small Cap |
First Trust and Innovator Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Innovator Small
The main advantage of trading using opposite First Trust and Innovator Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Innovator Small 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 Small will offset losses from the drop in Innovator Small's long position.| First Trust vs. iShares SP Mid Cap | First Trust vs. iShares SP Small Cap | First Trust vs. iShares SP Mid Cap | First Trust vs. iShares SP 500 |
| Innovator Small vs. Innovator ETFs Trust | Innovator Small vs. First Trust Cboe | Innovator Small vs. Innovator SP 500 | Innovator Small vs. Innovator Equity Power |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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