Correlation Between Innovator Nasdaq and Innovator Russell

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

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

Diversification Opportunities for Innovator Nasdaq and Innovator Russell

0.69

Correlation Coefficient

Innovator Nasdaq  Innovator Russell

Poor diversification

The 3 months correlation between Innovator and Innovator is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Nasdaq 100 Power and Innovator Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Russell 2000 and Innovator Nasdaq 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 Nasdaq 100 Power are associated (or correlated) with Innovator Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Russell 2000 has no effect on the direction of Innovator Nasdaq i.e., Innovator Nasdaq and Innovator Russell go up and down completely randomly.

Pair Corralation between Innovator Nasdaq and Innovator Russell

Given the investment horizon of 90 days Innovator Nasdaq 100 Power is expected to generate 0.41 times more return on investment than Innovator Russell. However, Innovator Nasdaq 100 Power is 2.43 times less risky than Innovator Russell. It trades about 0.28 of its potential returns per unit of risk. Innovator Russell 2000 is currently generating about 0.06 per unit of risk. If you would invest  4,659  in Innovator Nasdaq 100 Power on October 9, 2024 and sell it today you would earn a total of  206.00  from holding Innovator Nasdaq 100 Power or generate 4.42% return on investment over 90 days.

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

Innovator Nasdaq 100 Power  vs.  Innovator Russell 2000

Innovator Nasdaq 100

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Nasdaq 100 Power are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Innovator Nasdaq is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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. 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.

Pair Trading with Innovator Nasdaq and Innovator Russell

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

The idea behind Innovator Nasdaq 100 Power and Innovator Russell 2000 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.