Correlation Between T Rex and Innovator

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

By analyzing existing cross correlation between T Rex 2X Long and Innovator SP 500, you can compare the effects of market volatilities on T Rex 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 T Rex with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and Innovator.

Diversification Opportunities for T Rex and Innovator

0.04

Correlation Coefficient

T Rex  Innovator

Significant diversification

The 3 months correlation between NVDX and Innovator is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Long 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 T Rex 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 T Rex 2X Long 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 T Rex i.e., T Rex and Innovator go up and down completely randomly.

Pair Corralation between T Rex and Innovator

Given the investment horizon of 90 days T Rex 2X Long is expected to generate 15.88 times more return on investment than Innovator. However, T Rex is 15.88 times more volatile than Innovator SP 500. It trades about 0.0 of its potential returns per unit of risk. Innovator SP 500 is currently generating about -0.18 per unit of risk. If you would invest  971.00  in T Rex 2X Long on December 5, 2024 and sell it today you would lose (55.00) from holding T Rex 2X Long or give up 5.66% of portfolio value over 90 days.

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

T Rex 2X Long  vs.  Innovator SP 500

T Rex 2X

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rex 2X Long has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Innovator SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Innovator is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with T Rex and Innovator

The main advantage of trading using opposite T Rex and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex 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 T Rex 2X Long 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.