Correlation Between Innovator Russell and Innovator Nasdaq

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

By analyzing existing cross correlation between Innovator Russell 2000 and Innovator Nasdaq 100 Power, you can compare the effects of market volatilities on Innovator Russell and Innovator Nasdaq 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 Russell with a short position of Innovator Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Russell and Innovator Nasdaq.

Diversification Opportunities for Innovator Russell and Innovator Nasdaq

0.66

Correlation Coefficient

Innovator Russell  Innovator Nasdaq

Poor diversification

The 3 months correlation between Innovator and Innovator is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 and Innovator Nasdaq 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Nasdaq 100 and Innovator Russell 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 Russell 2000 are associated (or correlated) with Innovator Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Nasdaq 100 has no effect on the direction of Innovator Russell i.e., Innovator Russell and Innovator Nasdaq go up and down completely randomly.

Pair Corralation between Innovator Russell and Innovator Nasdaq

Given the investment horizon of 90 days Innovator Russell is expected to generate 1.46 times less return on investment than Innovator Nasdaq. In addition to that, Innovator Russell is 1.42 times more volatile than Innovator Nasdaq 100 Power. It trades about 0.07 of its total potential returns per unit of risk. Innovator Nasdaq 100 Power is currently generating about 0.15 per unit of volatility. If you would invest  3,512  in Innovator Nasdaq 100 Power on October 10, 2024 and sell it today you would earn a total of  1,546  from holding Innovator Nasdaq 100 Power or generate 44.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Innovator Russell 2000  vs.  Innovator Nasdaq 100 Power

Innovator Russell 2000

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Russell 2000 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator Russell is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Innovator Nasdaq 100

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Nasdaq 100 Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Innovator Russell and Innovator Nasdaq

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

The idea behind Innovator Russell 2000 and Innovator Nasdaq 100 Power 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.