Correlation Between Innovator and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Innovator and Innovator Equity 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 Equity 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 Equity Managed, you can compare the effects of market volatilities on Innovator and Innovator Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Innovator Equity.
Diversification Opportunities for Innovator and Innovator Equity
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Innovator and Innovator is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and Innovator Equity Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Managed 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Managed has no effect on the direction of Innovator i.e., Innovator and Innovator Equity go up and down completely randomly.
Pair Corralation between Innovator and Innovator Equity
Given the investment horizon of 90 days Innovator is expected to generate 1.72 times less return on investment than Innovator Equity. But when comparing it to its historical volatility, Innovator SP 500 is 1.78 times less risky than Innovator Equity. It trades about 0.14 of its potential returns per unit of risk. Innovator Equity Managed is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,005 in Innovator Equity Managed on September 1, 2024 and sell it today you would earn a total of 325.00 from holding Innovator Equity Managed or generate 10.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Innovator SP 500 vs. Innovator Equity Managed
Performance |
| Timeline |
| Innovator SP 500 |
| Innovator Equity Managed |
Innovator and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and Innovator Equity
The main advantage of trading using opposite Innovator and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, Innovator Equity 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 Equity will offset losses from the drop in Innovator Equity's long position.| Innovator vs. Innovator Equity Power | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
| Innovator Equity vs. Innovator ETFs Trust | Innovator Equity vs. First Trust Cboe | Innovator Equity vs. Innovator SP 500 | Innovator Equity 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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