Correlation Between Innovator and Innovator Power
Can any of the company-specific risk be diversified away by investing in both Innovator and Innovator Power 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 and Innovator Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator SP 500 and Innovator Power Buffer, you can compare the effects of market volatilities on Innovator and Innovator Power 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 with a short position of Innovator Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Innovator Power.
Diversification Opportunities for Innovator and Innovator Power
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and Innovator is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and Innovator Power Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Power Buffer and Innovator 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 SP 500 are associated (or correlated) with Innovator Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Power Buffer has no effect on the direction of Innovator i.e., Innovator and Innovator Power go up and down completely randomly.
Pair Corralation between Innovator and Innovator Power
Given the investment horizon of 90 days Innovator is expected to generate 1.4 times less return on investment than Innovator Power. But when comparing it to its historical volatility, Innovator SP 500 is 2.41 times less risky than Innovator Power. It trades about 0.24 of its potential returns per unit of risk. Innovator Power Buffer is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,154 in Innovator Power Buffer on August 30, 2024 and sell it today you would earn a total of 70.00 from holding Innovator Power Buffer or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator SP 500 vs. Innovator Power Buffer
Performance |
| Timeline |
| Innovator SP 500 |
| Innovator Power Buffer |
Innovator and Innovator Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and Innovator Power
The main advantage of trading using opposite Innovator and Innovator Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, Innovator Power 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 Power will offset losses from the drop in Innovator Power's long position.| Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
| Innovator Power vs. Innovator Buffer Step Up | Innovator Power vs. Innovator Laddered Allocation | Innovator Power vs. Innovator SP 500 | Innovator Power vs. Innovator SP 500 |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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