Correlation Between Invesco BulletShares and Innovator Equity

Can any of the company-specific risk be diversified away by investing in both Invesco BulletShares and Innovator Equity 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 Equity 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 Equity Buffer, you can compare the effects of market volatilities on Invesco BulletShares and Innovator Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco BulletShares and Innovator Equity.

Diversification Opportunities for Invesco BulletShares and Innovator Equity

0.88

Correlation Coefficient

Invesco BulletShares  Innovator Equity

Very poor diversification

The 3 months correlation between Invesco and Innovator is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BulletShares 2024 and Innovator Equity Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Buffer 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Buffer has no effect on the direction of Invesco BulletShares i.e., Invesco BulletShares and Innovator Equity go up and down completely randomly.

Pair Corralation between Invesco BulletShares and Innovator Equity

Given the investment horizon of 90 days Invesco BulletShares is expected to generate 3.6 times less return on investment than Innovator Equity. But when comparing it to its historical volatility, Invesco BulletShares 2024 is 16.84 times less risky than Innovator Equity. It trades about 0.58 of its potential returns per unit of risk. Innovator Equity Buffer is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,361  in Innovator Equity Buffer on September 26, 2024 and sell it today you would earn a total of  170.00  from holding Innovator Equity Buffer or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.19%
Values	Daily Returns

Invesco BulletShares 2024  vs.  Innovator Equity Buffer

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 recent stock price disarray, may contribute to short-term losses for the investors.

Innovator Equity Buffer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Buffer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Innovator Equity is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco BulletShares and Innovator Equity

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

The idea behind Invesco BulletShares 2024 and Innovator Equity Buffer 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.