Correlation Between Innovator Growth and Innovator MSCI

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

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

Diversification Opportunities for Innovator Growth and Innovator MSCI

-0.31

Correlation Coefficient

Innovator Growth  Innovator MSCI

Very good diversification

The 3 months correlation between Innovator and Innovator is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Power and Innovator MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator MSCI EAFE and Innovator Growth 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 Growth 100 Power are associated (or correlated) with Innovator MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator MSCI EAFE has no effect on the direction of Innovator Growth i.e., Innovator Growth and Innovator MSCI go up and down completely randomly.

Pair Corralation between Innovator Growth and Innovator MSCI

Given the investment horizon of 90 days Innovator Growth 100 Power is expected to under-perform the Innovator MSCI. In addition to that, Innovator Growth is 1.27 times more volatile than Innovator MSCI EAFE. It trades about -0.07 of its total potential returns per unit of risk. Innovator MSCI EAFE is currently generating about 0.25 per unit of volatility. If you would invest  3,033  in Innovator MSCI EAFE on December 21, 2024 and sell it today you would earn a total of  234.00  from holding Innovator MSCI EAFE or generate 7.72% return on investment over 90 days.

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

Innovator Growth 100 Power  vs.  Innovator MSCI EAFE

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Innovator MSCI EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator MSCI EAFE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Innovator MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Innovator Growth and Innovator MSCI

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

The idea behind Innovator Growth 100 Power and Innovator MSCI EAFE 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.