Correlation Between SPDR SP and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Innovator Equity 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 SPDR SP and Innovator Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Innovator Equity Power, you can compare the effects of market volatilities on SPDR SP and Innovator Equity 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 SPDR SP with a short position of Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Innovator Equity.
Diversification Opportunities for SPDR SP and Innovator Equity
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and Innovator is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Innovator Equity Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Power and SPDR SP 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 SPDR SP 500 are associated (or correlated) with Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Power has no effect on the direction of SPDR SP i.e., SPDR SP and Innovator Equity go up and down completely randomly.
Pair Corralation between SPDR SP and Innovator Equity
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.74 times more return on investment than Innovator Equity. However, SPDR SP is 1.74 times more volatile than Innovator Equity Power. It trades about 0.11 of its potential returns per unit of risk. Innovator Equity Power is currently generating about 0.13 per unit of risk. If you would invest 38,255 in SPDR SP 500 on August 27, 2024 and sell it today you would earn a total of 21,296 from holding SPDR SP 500 or generate 55.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Innovator Equity Power
Performance |
| Timeline |
| SPDR SP 500 |
| Innovator Equity Power |
SPDR SP and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Innovator Equity
The main advantage of trading using opposite SPDR SP and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Innovator Equity 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 Innovator Equity will offset losses from the drop in Innovator Equity's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
| Innovator Equity vs. FT Cboe Vest | Innovator Equity vs. Innovator SP 500 | Innovator Equity vs. FT Cboe Vest |
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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