Correlation Between Innovator Premium and First Trust

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

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

Diversification Opportunities for Innovator Premium and First Trust

0.0

Correlation Coefficient

Innovator Premium  First Trust

Pay attention - limited upside

The 3 months correlation between Innovator and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Premium Income and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and Innovator Premium 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 Premium Income are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Cboe has no effect on the direction of Innovator Premium i.e., Innovator Premium and First Trust go up and down completely randomly.

Pair Corralation between Innovator Premium and First Trust

If you would invest (100.00) in Innovator Premium Income on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Innovator Premium Income or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Innovator Premium Income  vs.  First Trust Cboe

Innovator Premium Income

Risk-Adjusted Performance

Good

Over the last 90 days Innovator Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Innovator Premium is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

First Trust Cboe

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Cboe has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, First Trust 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 Premium and First Trust

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

The idea behind Innovator Premium Income and First Trust Cboe 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.