Correlation Between IShares Expanded and Innovator Equity

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

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

Diversification Opportunities for IShares Expanded and Innovator Equity

0.65

Correlation Coefficient

IShares Expanded  Innovator Equity

Poor diversification

The 3 months correlation between IShares and Innovator is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and Innovator Equity Defined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Defined and IShares Expanded 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 Expanded Tech Software 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 Defined has no effect on the direction of IShares Expanded i.e., IShares Expanded and Innovator Equity go up and down completely randomly.

Pair Corralation between IShares Expanded and Innovator Equity

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to under-perform the Innovator Equity. In addition to that, IShares Expanded is 8.35 times more volatile than Innovator Equity Defined. It trades about -0.1 of its total potential returns per unit of risk. Innovator Equity Defined is currently generating about -0.04 per unit of volatility. If you would invest  2,516  in Innovator Equity Defined on December 30, 2024 and sell it today you would lose (14.00) from holding Innovator Equity Defined or give up 0.56% of portfolio value over 90 days.

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

iShares Expanded Tech Software  vs.  Innovator Equity Defined

iShares Expanded Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Expanded Tech Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Innovator Equity Defined

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Equity Defined has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Innovator Equity is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Expanded and Innovator Equity

The main advantage of trading using opposite IShares Expanded and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Expanded 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 iShares Expanded Tech Software and Innovator Equity Defined 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.