Correlation Between Innovator Growth and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator Growth and First Trust 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 First Trust 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 First Trust SMID, you can compare the effects of market volatilities on Innovator Growth and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Growth and First Trust.
Diversification Opportunities for Innovator Growth and First Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SMID has no effect on the direction of Innovator Growth i.e., Innovator Growth and First Trust go up and down completely randomly.
Pair Corralation between Innovator Growth and First Trust
Given the investment horizon of 90 days Innovator Growth is expected to generate 1.96 times less return on investment than First Trust. But when comparing it to its historical volatility, Innovator Growth 100 Accelerated is 1.8 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,586 in First Trust SMID on August 30, 2024 and sell it today you would earn a total of 398.00 from holding First Trust SMID or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator Growth 100 Accelerat vs. First Trust SMID
Performance |
| Timeline |
| Innovator Growth 100 |
| First Trust SMID |
Innovator Growth and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Growth and First Trust
The main advantage of trading using opposite Innovator Growth and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Growth position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind Innovator Growth 100 Accelerated and First Trust SMID 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.| First Trust vs. First Trust Rising | First Trust vs. First Trust Equity | First Trust vs. First Trust Small | First Trust vs. VictoryShares Small Cap |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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