Correlation Between Innovator ETFs and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Innovator ETFs and Invesco SP 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 ETFs and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator ETFs Trust and Invesco SP SmallCap, you can compare the effects of market volatilities on Innovator ETFs and Invesco SP 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 ETFs with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and Invesco SP.
Diversification Opportunities for Innovator ETFs and Invesco SP
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovator and Invesco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and Innovator ETFs 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 ETFs Trust are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and Invesco SP go up and down completely randomly.
Pair Corralation between Innovator ETFs and Invesco SP
Given the investment horizon of 90 days Innovator ETFs is expected to generate 2.16 times less return on investment than Invesco SP. But when comparing it to its historical volatility, Innovator ETFs Trust is 3.63 times less risky than Invesco SP. It trades about 0.16 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,547 in Invesco SP SmallCap on August 28, 2024 and sell it today you would earn a total of 517.00 from holding Invesco SP SmallCap or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator ETFs Trust vs. Invesco SP SmallCap
Performance |
| Timeline |
| Innovator ETFs Trust |
| Invesco SP SmallCap |
Innovator ETFs and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator ETFs and Invesco SP
The main advantage of trading using opposite Innovator ETFs and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator ETFs position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.| Innovator ETFs vs. Innovator Growth Accelerated | Innovator ETFs vs. Innovator ETFs Trust | Innovator ETFs vs. Innovator ETFs Trust | Innovator ETFs vs. Innovator ETFs Trust |
| Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco SP SmallCap | Invesco SP vs. Invesco SP MidCap |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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