Correlation Between Innovator Premium and Innovator

Can any of the company-specific risk be diversified away by investing in both Innovator Premium and Innovator 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 Innovator 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 Innovator SP 500, you can compare the effects of market volatilities on Innovator Premium and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Premium and Innovator.

Diversification Opportunities for Innovator Premium and Innovator

0.98

Correlation Coefficient

Innovator Premium  Innovator

Almost no diversification

The 3 months correlation between Innovator and Innovator is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Premium Income and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Innovator Premium i.e., Innovator Premium and Innovator go up and down completely randomly.

Pair Corralation between Innovator Premium and Innovator

Given the investment horizon of 90 days Innovator Premium is expected to generate 2.48 times less return on investment than Innovator. But when comparing it to its historical volatility, Innovator Premium Income is 3.19 times less risky than Innovator. It trades about 0.26 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,803  in Innovator SP 500 on September 13, 2024 and sell it today you would earn a total of  150.00  from holding Innovator SP 500 or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Innovator Premium Income  vs.  Innovator SP 500

Innovator Premium Income

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Premium Income are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Innovator Premium is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Innovator SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Innovator is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Innovator Premium and Innovator

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

The idea behind Innovator Premium Income and Innovator SP 500 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.