Correlation Between Innovator Growth and First Trust

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

By analyzing existing cross correlation between Innovator Growth 100 Accelerated and First Trust TCW, you can compare the effects of market volatilities on Innovator Growth and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Growth and First Trust.

Diversification Opportunities for Innovator Growth and First Trust

-0.71

Correlation Coefficient

Innovator Growth  First Trust

Pay attention - limited upside

The 3 months correlation between Innovator and First is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW 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 Accelerated are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust TCW has no effect on the direction of Innovator Growth i.e., Innovator Growth and First Trust go up and down completely randomly.

Pair Corralation between Innovator Growth and First Trust

Given the investment horizon of 90 days Innovator Growth 100 Accelerated is expected to generate 1.54 times more return on investment than First Trust. However, Innovator Growth is 1.54 times more volatile than First Trust TCW. It trades about 0.22 of its potential returns per unit of risk. First Trust TCW is currently generating about -0.1 per unit of risk. If you would invest  3,497  in Innovator Growth 100 Accelerated on September 12, 2024 and sell it today you would earn a total of  261.00  from holding Innovator Growth 100 Accelerated or generate 7.46% return on investment over 90 days.

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

Innovator Growth 100 Accelerat  vs.  First Trust TCW

Innovator Growth 100

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Growth 100 Accelerated are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Innovator Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovator Growth and First Trust

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

The idea behind Innovator Growth 100 Accelerated and First Trust TCW 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.