Correlation Between Innovator ETFs and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Innovator ETFs and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Innovator ETFs and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and Northern Lights.
Diversification Opportunities for Innovator ETFs and Northern Lights
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovator and Northern is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and Northern Lights go up and down completely randomly.
Pair Corralation between Innovator ETFs and Northern Lights
Given the investment horizon of 90 days Innovator ETFs Trust is expected to generate 0.55 times more return on investment than Northern Lights. However, Innovator ETFs Trust is 1.82 times less risky than Northern Lights. It trades about 0.17 of its potential returns per unit of risk. Northern Lights is currently generating about 0.08 per unit of risk. If you would invest 2,378 in Innovator ETFs Trust on September 1, 2024 and sell it today you would earn a total of 541.00 from holding Innovator ETFs Trust or generate 22.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.22% |
| Values | Daily Returns |
Innovator ETFs Trust vs. Northern Lights
Performance |
| Timeline |
| Innovator ETFs Trust |
| Northern Lights |
Innovator ETFs and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator ETFs and Northern Lights
The main advantage of trading using opposite Innovator ETFs and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator ETFs position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Innovator ETFs vs. Innovator ETFs Trust | Innovator ETFs vs. First Trust Cboe | Innovator ETFs vs. Innovator SP 500 | Innovator ETFs vs. Innovator SP 500 |
| Northern Lights vs. Vanguard Growth Index | Northern Lights vs. iShares Russell 1000 | Northern Lights vs. iShares SP 500 | Northern Lights 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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