Correlation Between Innovator Capital and First Trust

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

By analyzing existing cross correlation between Innovator Capital Management and First Trust Exchange Traded, you can compare the effects of market volatilities on Innovator Capital and First Trust 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 Capital with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Capital and First Trust.

Diversification Opportunities for Innovator Capital and First Trust

0.96

Correlation Coefficient

Innovator Capital  First Trust

Almost no diversification

The 3 months correlation between Innovator and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Capital Management and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Innovator Capital 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 Capital Management are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Innovator Capital i.e., Innovator Capital and First Trust go up and down completely randomly.

Pair Corralation between Innovator Capital and First Trust

Given the investment horizon of 90 days Innovator Capital Management is expected to generate 1.04 times more return on investment than First Trust. However, Innovator Capital is 1.04 times more volatile than First Trust Exchange Traded. It trades about 0.21 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.15 per unit of risk. If you would invest  2,770  in Innovator Capital Management on September 19, 2024 and sell it today you would earn a total of  349.00  from holding Innovator Capital Management or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	28.43%
Values	Daily Returns

Innovator Capital Management  vs.  First Trust Exchange Traded

Innovator Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Innovator Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Exchange

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovator Capital and First Trust

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

The idea behind Innovator Capital Management and First Trust Exchange Traded 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.