Correlation Between Innovator and Innovator Buffer
Can any of the company-specific risk be diversified away by investing in both Innovator and Innovator Buffer 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 Buffer 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 Buffer Step Up, you can compare the effects of market volatilities on Innovator and Innovator Buffer 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 Buffer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Innovator Buffer.
Diversification Opportunities for Innovator and Innovator Buffer
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Innovator and Innovator is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and Innovator Buffer Step Up in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Buffer Step 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 Buffer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Buffer Step has no effect on the direction of Innovator i.e., Innovator and Innovator Buffer go up and down completely randomly.
Pair Corralation between Innovator and Innovator Buffer
Given the investment horizon of 90 days Innovator is expected to generate 1.25 times less return on investment than Innovator Buffer. But when comparing it to its historical volatility, Innovator SP 500 is 1.44 times less risky than Innovator Buffer. It trades about 0.39 of its potential returns per unit of risk. Innovator Buffer Step Up is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,255 in Innovator Buffer Step Up on September 2, 2024 and sell it today you would earn a total of 120.00 from holding Innovator Buffer Step Up or generate 3.69% 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 Buffer Step Up
Performance |
| Timeline |
| Innovator SP 500 |
| Innovator Buffer Step |
Innovator and Innovator Buffer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and Innovator Buffer
The main advantage of trading using opposite Innovator and Innovator Buffer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, Innovator Buffer 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 Buffer will offset losses from the drop in Innovator Buffer's long position.| Innovator vs. Innovator SP 500 | Innovator vs. Innovator Equity Buffer | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
| Innovator Buffer vs. Innovator ETFs Trust | Innovator Buffer vs. First Trust Cboe | Innovator Buffer vs. Innovator SP 500 | Innovator Buffer 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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