Correlation Between Dimensional ETF and Innovator ETFs

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

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

Diversification Opportunities for Dimensional ETF and Innovator ETFs

0.89

Correlation Coefficient

Dimensional ETF  Innovator ETFs

Very poor diversification

The 3 months correlation between Dimensional and Innovator is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs Trust and Dimensional ETF 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 Dimensional ETF Trust are associated (or correlated) with Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Innovator ETFs go up and down completely randomly.

Pair Corralation between Dimensional ETF and Innovator ETFs

Given the investment horizon of 90 days Dimensional ETF Trust is expected to under-perform the Innovator ETFs. In addition to that, Dimensional ETF is 1.47 times more volatile than Innovator ETFs Trust. It trades about -0.18 of its total potential returns per unit of risk. Innovator ETFs Trust is currently generating about -0.25 per unit of volatility. If you would invest  2,949  in Innovator ETFs Trust on October 9, 2024 and sell it today you would lose (64.00) from holding Innovator ETFs Trust or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dimensional ETF Trust  vs.  Innovator ETFs Trust

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Innovator ETFs Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator ETFs Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Innovator ETFs is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dimensional ETF and Innovator ETFs

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

The idea behind Dimensional ETF Trust and Innovator ETFs Trust 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 Stocks Directory module to find actively traded stocks across global markets.