Correlation Between Innovator MSCI and Innovator ETFs

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

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

Diversification Opportunities for Innovator MSCI and Innovator ETFs

0.86

Correlation Coefficient

Innovator MSCI  Innovator ETFs

Very poor diversification

The 3 months correlation between Innovator and Innovator is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Innovator MSCI Emerging 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 Innovator MSCI 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 MSCI Emerging 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 Innovator MSCI i.e., Innovator MSCI and Innovator ETFs go up and down completely randomly.

Pair Corralation between Innovator MSCI and Innovator ETFs

Given the investment horizon of 90 days Innovator MSCI Emerging is expected to generate about the same return on investment as Innovator ETFs Trust. However, Innovator MSCI is 3.08 times more volatile than Innovator ETFs Trust. It trades about 0.07 of its potential returns per unit of risk. Innovator ETFs Trust is currently producing about 0.23 per unit of risk. If you would invest  2,569  in Innovator ETFs Trust on December 22, 2024 and sell it today you would earn a total of  74.00  from holding Innovator ETFs Trust or generate 2.88% return on investment over 90 days.

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

Innovator MSCI Emerging  vs.  Innovator ETFs Trust

Innovator MSCI Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator MSCI Emerging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Innovator MSCI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Innovator ETFs Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Innovator ETFs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Innovator MSCI and Innovator ETFs

The main advantage of trading using opposite Innovator MSCI and Innovator ETFs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator MSCI 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 Innovator MSCI Emerging 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.