Correlation Between Innovator Equity and IndexIQ

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

By analyzing existing cross correlation between Innovator Equity Buffer and IndexIQ, you can compare the effects of market volatilities on Innovator Equity and IndexIQ 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 IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Equity and IndexIQ.

Diversification Opportunities for Innovator Equity and IndexIQ

0.75

Correlation Coefficient

Innovator Equity  IndexIQ

Poor diversification

The 3 months correlation between Innovator and IndexIQ is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Equity Buffer and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 Buffer are associated (or correlated) with IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of Innovator Equity i.e., Innovator Equity and IndexIQ go up and down completely randomly.

Pair Corralation between Innovator Equity and IndexIQ

If you would invest  4,346  in Innovator Equity Buffer on September 19, 2024 and sell it today you would earn a total of  78.00  from holding Innovator Equity Buffer or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Innovator Equity Buffer  vs.  IndexIQ

Innovator Equity Buffer

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Buffer are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IndexIQ is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Innovator Equity and IndexIQ

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

The idea behind Innovator Equity Buffer and IndexIQ 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.