Correlation Between Invesco BulletShares and Innovator

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

By analyzing existing cross correlation between Invesco BulletShares 2024 and Innovator SP 500, you can compare the effects of market volatilities on Invesco BulletShares and Innovator 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 Invesco BulletShares with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco BulletShares and Innovator.

Diversification Opportunities for Invesco BulletShares and Innovator

0.53

Correlation Coefficient

Invesco BulletShares  Innovator

Very weak diversification

The 3 months correlation between Invesco and Innovator is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BulletShares 2024 and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 and Invesco BulletShares 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 Invesco BulletShares 2024 are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Invesco BulletShares i.e., Invesco BulletShares and Innovator go up and down completely randomly.

Pair Corralation between Invesco BulletShares and Innovator

Given the investment horizon of 90 days Invesco BulletShares is expected to generate 2.6 times less return on investment than Innovator. But when comparing it to its historical volatility, Invesco BulletShares 2024 is 6.74 times less risky than Innovator. It trades about 0.58 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,654  in Innovator SP 500 on September 26, 2024 and sell it today you would earn a total of  130.00  from holding Innovator SP 500 or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Invesco BulletShares 2024  vs.  Innovator SP 500

Invesco BulletShares 2024

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BulletShares 2024 are ranked lower than 45 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Invesco BulletShares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Innovator SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Innovator is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco BulletShares and Innovator

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

The idea behind Invesco BulletShares 2024 and Innovator SP 500 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.