Correlation Between ETRACS 2xMonthly and Innovator Loup

Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and Innovator Loup 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 ETRACS 2xMonthly and Innovator Loup into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETRACS 2xMonthly Pay and Innovator Loup Frontier, you can compare the effects of market volatilities on ETRACS 2xMonthly and Innovator Loup 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 ETRACS 2xMonthly with a short position of Innovator Loup. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and Innovator Loup.

Diversification Opportunities for ETRACS 2xMonthly and Innovator Loup

-0.63

Correlation Coefficient

ETRACS 2xMonthly  Innovator Loup

Excellent diversification

The 3 months correlation between ETRACS and Innovator is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and Innovator Loup Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Loup Frontier and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay are associated (or correlated) with Innovator Loup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Loup Frontier has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and Innovator Loup go up and down completely randomly.

Pair Corralation between ETRACS 2xMonthly and Innovator Loup

Given the investment horizon of 90 days ETRACS 2xMonthly is expected to generate 6.74 times less return on investment than Innovator Loup. In addition to that, ETRACS 2xMonthly is 1.03 times more volatile than Innovator Loup Frontier. It trades about 0.01 of its total potential returns per unit of risk. Innovator Loup Frontier is currently generating about 0.07 per unit of volatility. If you would invest  3,227  in Innovator Loup Frontier on October 4, 2024 and sell it today you would earn a total of  2,186  from holding Innovator Loup Frontier or generate 67.74% return on investment over 90 days.

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

ETRACS 2xMonthly Pay  vs.  Innovator Loup Frontier

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETRACS 2xMonthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Innovator Loup Frontier

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Loup Frontier are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Innovator Loup reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETRACS 2xMonthly and Innovator Loup

The main advantage of trading using opposite ETRACS 2xMonthly and Innovator Loup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, Innovator Loup 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 Loup will offset losses from the drop in Innovator Loup's long position.

The idea behind ETRACS 2xMonthly Pay and Innovator Loup Frontier 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.