Correlation Between Innovator Equity and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both Innovator Equity and ProShares MSCI 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 Equity and ProShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Equity Accelerated and ProShares MSCI Transformational, you can compare the effects of market volatilities on Innovator Equity and ProShares MSCI 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 Equity with a short position of ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Equity and ProShares MSCI.
Diversification Opportunities for Innovator Equity and ProShares MSCI
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Innovator and ProShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Equity Accelerated and ProShares MSCI Transformationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI Trans and Innovator Equity 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 Equity Accelerated are associated (or correlated) with ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Trans has no effect on the direction of Innovator Equity i.e., Innovator Equity and ProShares MSCI go up and down completely randomly.
Pair Corralation between Innovator Equity and ProShares MSCI
Given the investment horizon of 90 days Innovator Equity is expected to generate 1.73 times less return on investment than ProShares MSCI. But when comparing it to its historical volatility, Innovator Equity Accelerated is 1.66 times less risky than ProShares MSCI. It trades about 0.12 of its potential returns per unit of risk. ProShares MSCI Transformational is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,580 in ProShares MSCI Transformational on August 26, 2024 and sell it today you would earn a total of 1,034 from holding ProShares MSCI Transformational or generate 28.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator Equity Accelerated vs. ProShares MSCI Transformationa
Performance |
| Timeline |
| Innovator Equity Acc |
| ProShares MSCI Trans |
Innovator Equity and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Equity and ProShares MSCI
The main advantage of trading using opposite Innovator Equity and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Equity position performs unexpectedly, ProShares MSCI 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 ProShares MSCI will offset losses from the drop in ProShares MSCI's long position.The idea behind Innovator Equity Accelerated and ProShares MSCI Transformational pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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