Correlation Between Innovator Nasdaq and ETF Series
Can any of the company-specific risk be diversified away by investing in both Innovator Nasdaq and ETF Series 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 Nasdaq and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Nasdaq 100 Power and ETF Series Solutions, you can compare the effects of market volatilities on Innovator Nasdaq and ETF Series 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 Nasdaq with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Nasdaq and ETF Series.
Diversification Opportunities for Innovator Nasdaq and ETF Series
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and ETF is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Nasdaq 100 Power and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and Innovator Nasdaq 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 Nasdaq 100 Power are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Innovator Nasdaq i.e., Innovator Nasdaq and ETF Series go up and down completely randomly.
Pair Corralation between Innovator Nasdaq and ETF Series
Given the investment horizon of 90 days Innovator Nasdaq is expected to generate 1.14 times less return on investment than ETF Series. But when comparing it to its historical volatility, Innovator Nasdaq 100 Power is 1.33 times less risky than ETF Series. It trades about 0.11 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,428 in ETF Series Solutions on August 29, 2024 and sell it today you would earn a total of 53.00 from holding ETF Series Solutions or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator Nasdaq 100 Power vs. ETF Series Solutions
Performance |
| Timeline |
| Innovator Nasdaq 100 |
| ETF Series Solutions |
Innovator Nasdaq and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Nasdaq and ETF Series
The main advantage of trading using opposite Innovator Nasdaq and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Nasdaq position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| Innovator Nasdaq vs. Innovator Nasdaq 100 Power | Innovator Nasdaq vs. Innovator Growth 100 Power | Innovator Nasdaq vs. Innovator Nasdaq 100 Power | Innovator Nasdaq vs. Innovator Russell 2000 |
| ETF Series vs. Alpha Architect Quantitative | ETF Series vs. Alpha Architect International | ETF Series vs. Alpha Architect International | ETF Series vs. Alpha Architect Quantitative |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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