Correlation Between Innovator and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Innovator and FT Cboe 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 FT Cboe 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 FT Cboe Vest, you can compare the effects of market volatilities on Innovator and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and FT Cboe.
Diversification Opportunities for Innovator and FT Cboe
No risk reduction
The 3 months correlation between Innovator and FJUN is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Innovator i.e., Innovator and FT Cboe go up and down completely randomly.
Pair Corralation between Innovator and FT Cboe
Given the investment horizon of 90 days Innovator is expected to generate 1.28 times less return on investment than FT Cboe. But when comparing it to its historical volatility, Innovator SP 500 is 1.67 times less risky than FT Cboe. It trades about 0.23 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,118 in FT Cboe Vest on September 1, 2024 and sell it today you would earn a total of 1,093 from holding FT Cboe Vest or generate 26.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Innovator SP 500 vs. FT Cboe Vest
Performance |
| Timeline |
| Innovator SP 500 |
| FT Cboe Vest |
Innovator and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and FT Cboe
The main advantage of trading using opposite Innovator and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| Innovator vs. Innovator ETFs Trust | Innovator vs. First Trust Cboe | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
| FT Cboe vs. Innovator ETFs Trust | FT Cboe vs. First Trust Cboe | FT Cboe vs. Innovator SP 500 | FT Cboe 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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