Correlation Between Innovator Russell and Innovator Growth

Can any of the company-specific risk be diversified away by investing in both Innovator Russell and Innovator Growth 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 Growth 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 Growth 100 Power, you can compare the effects of market volatilities on Innovator Russell and Innovator Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Russell and Innovator Growth.

Diversification Opportunities for Innovator Russell and Innovator Growth

0.82

Correlation Coefficient

Innovator Russell  Innovator Growth

Very poor diversification

The 3 months correlation between Innovator and Innovator is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 and Innovator Growth 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Growth 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Growth 100 has no effect on the direction of Innovator Russell i.e., Innovator Russell and Innovator Growth go up and down completely randomly.

Pair Corralation between Innovator Russell and Innovator Growth

Given the investment horizon of 90 days Innovator Russell 2000 is expected to under-perform the Innovator Growth. In addition to that, Innovator Russell is 1.02 times more volatile than Innovator Growth 100 Power. It trades about -0.07 of its total potential returns per unit of risk. Innovator Growth 100 Power is currently generating about -0.07 per unit of volatility. If you would invest  5,171  in Innovator Growth 100 Power on December 21, 2024 and sell it today you would lose (141.00) from holding Innovator Growth 100 Power or give up 2.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Innovator Russell 2000  vs.  Innovator Growth 100 Power

Innovator Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Innovator Russell is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Innovator Growth 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Growth 100 Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Innovator Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Innovator Russell and Innovator Growth

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

The idea behind Innovator Russell 2000 and Innovator Growth 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.