Correlation Between Innovator Equity and IShares SP
Can any of the company-specific risk be diversified away by investing in both Innovator Equity and IShares SP 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 IShares SP 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 iShares SP Small Cap, you can compare the effects of market volatilities on Innovator Equity and IShares SP 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Equity and IShares SP.
Diversification Opportunities for Innovator Equity and IShares SP
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Innovator and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Equity Accelerated and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of Innovator Equity i.e., Innovator Equity and IShares SP go up and down completely randomly.
Pair Corralation between Innovator Equity and IShares SP
Given the investment horizon of 90 days Innovator Equity is expected to generate 1.64 times less return on investment than IShares SP. But when comparing it to its historical volatility, Innovator Equity Accelerated is 2.67 times less risky than IShares SP. It trades about 0.12 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,264 in iShares SP Small Cap on August 27, 2024 and sell it today you would earn a total of 2,302 from holding iShares SP Small Cap or generate 24.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator Equity Accelerated vs. iShares SP Small Cap
Performance |
| Timeline |
| Innovator Equity Acc |
| iShares SP Small |
Innovator Equity and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Equity and IShares SP
The main advantage of trading using opposite Innovator Equity and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Equity position performs unexpectedly, IShares SP 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 IShares SP will offset losses from the drop in IShares SP's long position.The idea behind Innovator Equity Accelerated and iShares SP Small Cap 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.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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