Correlation Between Innovator Russell and Ballast SmallMid

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

Diversification Opportunities for Innovator Russell and Ballast SmallMid

0.98

Correlation Coefficient

Innovator Russell  Ballast SmallMid

Almost no diversification

The 3 months correlation between Innovator and Ballast is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 and Ballast SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballast SmallMid Cap 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 Ballast SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballast SmallMid Cap has no effect on the direction of Innovator Russell i.e., Innovator Russell and Ballast SmallMid go up and down completely randomly.

Pair Corralation between Innovator Russell and Ballast SmallMid

Given the investment horizon of 90 days Innovator Russell 2000 is expected to generate 0.59 times more return on investment than Ballast SmallMid. However, Innovator Russell 2000 is 1.68 times less risky than Ballast SmallMid. It trades about -0.09 of its potential returns per unit of risk. Ballast SmallMid Cap is currently generating about -0.08 per unit of risk. If you would invest  2,946  in Innovator Russell 2000 on December 27, 2024 and sell it today you would lose (104.00) from holding Innovator Russell 2000 or give up 3.53% of portfolio value over 90 days.

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

Innovator Russell 2000  vs.  Ballast SmallMid Cap

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. Despite quite persistent basic indicators, Innovator Russell is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ballast SmallMid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Innovator Russell and Ballast SmallMid

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

The idea behind Innovator Russell 2000 and Ballast SmallMid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.