Correlation Between First Trust and Innovator ETFs
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Innovator ETFs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and Innovator ETFs Trust, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Innovator ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Innovator ETFs.
Diversification Opportunities for First Trust and Innovator ETFs
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Innovator is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded 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 First Trust 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 First Trust Exchange Traded 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 First Trust i.e., First Trust and Innovator ETFs go up and down completely randomly.
Pair Corralation between First Trust and Innovator ETFs
Given the investment horizon of 90 days First Trust is expected to generate 1.06 times less return on investment than Innovator ETFs. But when comparing it to its historical volatility, First Trust Exchange Traded is 3.05 times less risky than Innovator ETFs. It trades about 0.18 of its potential returns per unit of risk. Innovator ETFs Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,963 in Innovator ETFs Trust on September 25, 2024 and sell it today you would earn a total of 20.00 from holding Innovator ETFs Trust or generate 0.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Exchange Traded vs. Innovator ETFs Trust
Performance |
Timeline |
First Trust Exchange |
Innovator ETFs Trust |
First Trust and Innovator ETFs Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and Innovator ETFs
The main advantage of trading using opposite First Trust and Innovator ETFs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Exchange Traded 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.Innovator ETFs vs. First Trust Exchange Traded | Innovator ETFs vs. FT Cboe Vest | Innovator ETFs vs. FT Cboe Vest |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |