Correlation Between Innovator Growth and Principal Exchange
Can any of the company-specific risk be diversified away by investing in both Innovator Growth and Principal Exchange 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 Growth and Principal Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Growth 100 Accelerated and Principal Exchange Traded Funds, you can compare the effects of market volatilities on Innovator Growth and Principal Exchange 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 Growth with a short position of Principal Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Growth and Principal Exchange.
Diversification Opportunities for Innovator Growth and Principal Exchange
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovator and Principal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat and Principal Exchange Traded Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Exchange and Innovator Growth 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 Growth 100 Accelerated are associated (or correlated) with Principal Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Exchange has no effect on the direction of Innovator Growth i.e., Innovator Growth and Principal Exchange go up and down completely randomly.
Pair Corralation between Innovator Growth and Principal Exchange
Given the investment horizon of 90 days Innovator Growth 100 Accelerated is expected to generate 4.32 times more return on investment than Principal Exchange. However, Innovator Growth is 4.32 times more volatile than Principal Exchange Traded Funds. It trades about 0.37 of its potential returns per unit of risk. Principal Exchange Traded Funds is currently generating about 0.16 per unit of risk. If you would invest 3,586 in Innovator Growth 100 Accelerated on September 1, 2024 and sell it today you would earn a total of 149.00 from holding Innovator Growth 100 Accelerated or generate 4.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Innovator Growth 100 Accelerat vs. Principal Exchange Traded Fund
Performance |
| Timeline |
| Innovator Growth 100 |
| Principal Exchange |
Innovator Growth and Principal Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Growth and Principal Exchange
The main advantage of trading using opposite Innovator Growth and Principal Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Growth position performs unexpectedly, Principal Exchange 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 Principal Exchange will offset losses from the drop in Principal Exchange's long position.The idea behind Innovator Growth 100 Accelerated and Principal Exchange Traded Funds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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