Correlation Between Innovator ETFs and First Trust
Can any of the company-specific risk be diversified away by investing in both Innovator ETFs 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 ETFs 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 ETFs Trust and First Trust Growth, you can compare the effects of market volatilities on Innovator ETFs 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 ETFs with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and First Trust.
Diversification Opportunities for Innovator ETFs and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Innovator and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and First Trust Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Growth 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 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 Growth has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and First Trust go up and down completely randomly.
Pair Corralation between Innovator ETFs and First Trust
Given the investment horizon of 90 days Innovator ETFs is expected to generate 1.12 times less return on investment than First Trust. But when comparing it to its historical volatility, Innovator ETFs Trust is 1.71 times less risky than First Trust. It trades about 0.17 of its potential returns per unit of risk. First Trust Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,055 in First Trust Growth on August 31, 2024 and sell it today you would earn a total of 1,262 from holding First Trust Growth or generate 61.41% 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. First Trust Growth
Performance |
| Timeline |
| Innovator ETFs Trust |
| First Trust Growth |
Innovator ETFs and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator ETFs and First Trust
The main advantage of trading using opposite Innovator ETFs and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator ETFs 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.| 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 |
| First Trust vs. Vanguard Growth Index | First Trust vs. iShares Russell 1000 | First Trust vs. iShares SP 500 | First Trust vs. iShares Core SP |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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