Correlation Between IShares 25 and Innovator

Can any of the company-specific risk be diversified away by investing in both IShares 25 and Innovator 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 IShares 25 and Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 25 Year and Innovator 20 Year, you can compare the effects of market volatilities on IShares 25 and Innovator 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 IShares 25 with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 25 and Innovator.

Diversification Opportunities for IShares 25 and Innovator

0.98

Correlation Coefficient

IShares 25  Innovator

Almost no diversification

The 3 months correlation between IShares and Innovator is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares 25 Year and Innovator 20 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator 20 Year and IShares 25 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 iShares 25 Year are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator 20 Year has no effect on the direction of IShares 25 i.e., IShares 25 and Innovator go up and down completely randomly.

Pair Corralation between IShares 25 and Innovator

Given the investment horizon of 90 days iShares 25 Year is expected to under-perform the Innovator. In addition to that, IShares 25 is 3.78 times more volatile than Innovator 20 Year. It trades about -0.47 of its total potential returns per unit of risk. Innovator 20 Year is currently generating about -0.63 per unit of volatility. If you would invest  2,044  in Innovator 20 Year on October 10, 2024 and sell it today you would lose (99.00) from holding Innovator 20 Year or give up 4.84% of portfolio value over 90 days.

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

iShares 25 Year  vs.  Innovator 20 Year

iShares 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Innovator 20 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking indicators, Innovator is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares 25 and Innovator

The main advantage of trading using opposite IShares 25 and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 25 position performs unexpectedly, Innovator 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 will offset losses from the drop in Innovator's long position.

The idea behind iShares 25 Year and Innovator 20 Year 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.