Correlation Between SPACE and Innovator Equity

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

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

Diversification Opportunities for SPACE and Innovator Equity

0.8

Correlation Coefficient

SPACE  Innovator Equity

Very poor diversification

The 3 months correlation between SPACE and Innovator is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Innovator Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Premium and SPACE 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 SPACE are associated (or correlated) with Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Premium has no effect on the direction of SPACE i.e., SPACE and Innovator Equity go up and down completely randomly.

Pair Corralation between SPACE and Innovator Equity

Assuming the 90 days horizon SPACE is expected to generate 65.19 times more return on investment than Innovator Equity. However, SPACE is 65.19 times more volatile than Innovator Equity Premium. It trades about 0.2 of its potential returns per unit of risk. Innovator Equity Premium is currently generating about 0.28 per unit of risk. If you would invest  33.00  in SPACE on August 30, 2024 and sell it today you would earn a total of  23.00  from holding SPACE or generate 69.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

SPACE  vs.  Innovator Equity Premium

SPACE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Innovator Equity Premium

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Premium are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Innovator Equity is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPACE and Innovator Equity

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

The idea behind SPACE and Innovator Equity Premium 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.