Correlation Between NYSE Composite and Innovator Small
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Innovator Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Innovator Small Cap, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Innovator Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Innovator Small.
Diversification Opportunities for NYSE Composite and Innovator Small
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Innovator is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Innovator Small go up and down completely randomly.
Pair Corralation between NYSE Composite and Innovator Small
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.17 times more return on investment than Innovator Small. However, NYSE Composite is 1.17 times more volatile than Innovator Small Cap. It trades about 0.08 of its potential returns per unit of risk. Innovator Small Cap is currently generating about 0.03 per unit of risk. If you would invest 1,800,696 in NYSE Composite on November 28, 2024 and sell it today you would earn a total of 191,709 from holding NYSE Composite or generate 10.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 66.12% |
| Values | Daily Returns |
NYSE Composite vs. Innovator Small Cap
Performance |
| Timeline |
NYSE Composite and Innovator Small Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Innovator Small Cap
Pair trading matchups for Innovator Small
Pair Trading with NYSE Composite and Innovator Small
The main advantage of trading using opposite NYSE Composite and Innovator Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Inter Parfums | NYSE Composite vs. Amkor Technology | NYSE Composite vs. Unilever PLC ADR | NYSE Composite vs. Estee Lauder Companies |
| Innovator Small vs. Dimensional ETF Trust | Innovator Small vs. Vanguard Small Cap Index | Innovator Small vs. First Trust Multi Manager | Innovator Small vs. Vanguard SP Small Cap |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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