Correlation Between Innovator ETFs and Innovator Equity

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

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

Diversification Opportunities for Innovator ETFs and Innovator Equity

0.76

Correlation Coefficient

Innovator ETFs  Innovator Equity

Poor diversification

The 3 months correlation between Innovator and Innovator is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust 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 Innovator ETFs 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 ETFs Trust 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 Innovator ETFs i.e., Innovator ETFs and Innovator Equity go up and down completely randomly.

Pair Corralation between Innovator ETFs and Innovator Equity

Given the investment horizon of 90 days Innovator ETFs Trust is expected to generate 2.64 times more return on investment than Innovator Equity. However, Innovator ETFs is 2.64 times more volatile than Innovator Equity Premium. It trades about 0.1 of its potential returns per unit of risk. Innovator Equity Premium is currently generating about 0.09 per unit of risk. If you would invest  2,927  in Innovator ETFs Trust on December 1, 2024 and sell it today you would earn a total of  76.00  from holding Innovator ETFs Trust or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Innovator ETFs Trust  vs.  Innovator Equity Premium

Innovator ETFs Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Innovator ETFs is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Innovator Equity Premium

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Premium are ranked lower than 6 (%) 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 Innovator ETFs and Innovator Equity

The main advantage of trading using opposite Innovator ETFs and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator ETFs 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 Innovator ETFs Trust 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.