Correlation Between Innovator ETFs and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both Innovator ETFs and WisdomTree SmallCap 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 WisdomTree SmallCap 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 WisdomTree SmallCap Quality, you can compare the effects of market volatilities on Innovator ETFs and WisdomTree SmallCap 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 WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and WisdomTree SmallCap.
Diversification Opportunities for Innovator ETFs and WisdomTree SmallCap
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Innovator and WisdomTree is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 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 WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between Innovator ETFs and WisdomTree SmallCap
Given the investment horizon of 90 days Innovator ETFs Trust is expected to generate 0.49 times more return on investment than WisdomTree SmallCap. However, Innovator ETFs Trust is 2.06 times less risky than WisdomTree SmallCap. It trades about 0.15 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.06 per unit of risk. If you would invest 1,903 in Innovator ETFs Trust on August 30, 2024 and sell it today you would earn a total of 1,001 from holding Innovator ETFs Trust or generate 52.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator ETFs Trust vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| Innovator ETFs Trust |
| WisdomTree SmallCap |
Innovator ETFs and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator ETFs and WisdomTree SmallCap
The main advantage of trading using opposite Innovator ETFs and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator ETFs position performs unexpectedly, WisdomTree SmallCap 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 WisdomTree SmallCap will offset losses from the drop in WisdomTree SmallCap's long position.| Innovator ETFs vs. Innovator ETFs Trust | Innovator ETFs vs. Innovator Growth Accelerated | Innovator ETFs vs. Innovator Growth 100 Accelerated | Innovator ETFs vs. Innovator ETFs Trust |
| WisdomTree SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Interest Rate | WisdomTree SmallCap vs. WisdomTree Japan Hedged | WisdomTree SmallCap vs. WisdomTree Interest Rate |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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