Correlation Between Innovator and VanEck Preferred

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

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

Diversification Opportunities for Innovator and VanEck Preferred

0.87

Correlation Coefficient

Innovator  VanEck Preferred

Very poor diversification

The 3 months correlation between Innovator and VanEck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP Investment and VanEck Preferred Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Preferred Sec and Innovator 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 SP Investment are associated (or correlated) with VanEck Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Preferred Sec has no effect on the direction of Innovator i.e., Innovator and VanEck Preferred go up and down completely randomly.

Pair Corralation between Innovator and VanEck Preferred

Given the investment horizon of 90 days Innovator SP Investment is expected to generate 1.35 times more return on investment than VanEck Preferred. However, Innovator is 1.35 times more volatile than VanEck Preferred Securities. It trades about -0.02 of its potential returns per unit of risk. VanEck Preferred Securities is currently generating about -0.04 per unit of risk. If you would invest  1,802  in Innovator SP Investment on December 29, 2024 and sell it today you would lose (22.00) from holding Innovator SP Investment or give up 1.22% of portfolio value over 90 days.

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

Innovator SP Investment  vs.  VanEck Preferred Securities

Innovator SP Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator SP Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Innovator is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Preferred Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Preferred Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Preferred 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 and VanEck Preferred

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

The idea behind Innovator SP Investment and VanEck Preferred Securities 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.