Correlation Between Innovator and Innovator Premium
Can any of the company-specific risk be diversified away by investing in both Innovator and Innovator Premium 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 Premium 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 Premium Income, you can compare the effects of market volatilities on Innovator and Innovator Premium 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 Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Innovator Premium.
Diversification Opportunities for Innovator and Innovator Premium
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and Innovator is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and Innovator Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Premium Income 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 Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Premium Income has no effect on the direction of Innovator i.e., Innovator and Innovator Premium go up and down completely randomly.
Pair Corralation between Innovator and Innovator Premium
Given the investment horizon of 90 days Innovator SP 500 is expected to generate 3.56 times more return on investment than Innovator Premium. However, Innovator is 3.56 times more volatile than Innovator Premium Income. It trades about 0.15 of its potential returns per unit of risk. Innovator Premium Income is currently generating about 0.19 per unit of risk. If you would invest 3,331 in Innovator SP 500 on September 2, 2024 and sell it today you would earn a total of 819.00 from holding Innovator SP 500 or generate 24.59% 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 Premium Income
Performance |
| Timeline |
| Innovator SP 500 |
| Innovator Premium Income |
Innovator and Innovator Premium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and Innovator Premium
The main advantage of trading using opposite Innovator and Innovator Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, Innovator Premium 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 Premium will offset losses from the drop in Innovator Premium's long position.| Innovator vs. Innovator SP 500 | Innovator vs. Innovator Equity Buffer | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
| Innovator Premium vs. Innovator ETFs Trust | Innovator Premium vs. First Trust Cboe | Innovator Premium vs. Innovator SP 500 | Innovator Premium 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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