Correlation Between Innovator Premium and Schwab TIPS

Can any of the company-specific risk be diversified away by investing in both Innovator Premium and Schwab TIPS 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 Premium and Schwab TIPS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innovator Premium Income and Schwab TIPS ETF, you can compare the effects of market volatilities on Innovator Premium and Schwab TIPS 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 Premium with a short position of Schwab TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Premium and Schwab TIPS.

Diversification Opportunities for Innovator Premium and Schwab TIPS

-0.64

Correlation Coefficient

Innovator Premium  Schwab TIPS

Excellent diversification

The 3 months correlation between Innovator and Schwab is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Premium Income and Schwab TIPS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab TIPS ETF and Innovator Premium 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 Premium Income are associated (or correlated) with Schwab TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab TIPS ETF has no effect on the direction of Innovator Premium i.e., Innovator Premium and Schwab TIPS go up and down completely randomly.

Pair Corralation between Innovator Premium and Schwab TIPS

Given the investment horizon of 90 days Innovator Premium Income is expected to generate 0.42 times more return on investment than Schwab TIPS. However, Innovator Premium Income is 2.4 times less risky than Schwab TIPS. It trades about 0.17 of its potential returns per unit of risk. Schwab TIPS ETF is currently generating about 0.02 per unit of risk. If you would invest  2,230  in Innovator Premium Income on September 29, 2024 and sell it today you would earn a total of  266.00  from holding Innovator Premium Income or generate 11.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.51%
Values	Daily Returns

Innovator Premium Income  vs.  Schwab TIPS ETF

Innovator Premium Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Premium Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Innovator Premium is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Schwab TIPS ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab TIPS ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Schwab TIPS is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Innovator Premium and Schwab TIPS

The main advantage of trading using opposite Innovator Premium and Schwab TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Premium position performs unexpectedly, Schwab TIPS 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 Schwab TIPS will offset losses from the drop in Schwab TIPS's long position.

The idea behind Innovator Premium Income and Schwab TIPS ETF 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.