Correlation Between VanEck Preferred and Innovator

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

By analyzing existing cross correlation between VanEck Preferred Securities and Innovator SP Investment, you can compare the effects of market volatilities on VanEck Preferred 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 VanEck Preferred with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Preferred and Innovator.

Diversification Opportunities for VanEck Preferred and Innovator

0.87

Correlation Coefficient

VanEck Preferred  Innovator

Very poor diversification

The 3 months correlation between VanEck and Innovator is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Preferred Securities and Innovator SP Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP Investment and VanEck Preferred 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 VanEck Preferred Securities 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 Investment has no effect on the direction of VanEck Preferred i.e., VanEck Preferred and Innovator go up and down completely randomly.

Pair Corralation between VanEck Preferred and Innovator

Given the investment horizon of 90 days VanEck Preferred Securities is expected to under-perform the Innovator. But the etf apears to be less risky and, when comparing its historical volatility, VanEck Preferred Securities is 1.35 times less risky than Innovator. The etf trades about -0.04 of its potential returns per unit of risk. The Innovator SP Investment is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,802  in Innovator SP Investment on December 30, 2024 and sell it today you would lose (21.00) from holding Innovator SP Investment or give up 1.17% of portfolio value over 90 days.

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

VanEck Preferred Securities  vs.  Innovator SP Investment

VanEck Preferred Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Preferred Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Innovator SP Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator SP Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Innovator is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VanEck Preferred and Innovator

The main advantage of trading using opposite VanEck Preferred and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Preferred 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 VanEck Preferred Securities and Innovator SP Investment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.