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 IndustrialsProducer, 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

0.46

Correlation Coefficient

Innovator Growth  First Trust

Very weak diversification

The 3 months correlation between Innovator and First is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat and First Trust IndustrialsProduce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Industri 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 Industri 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 0.82 times more return on investment than First Trust. However, Innovator Growth 100 Accelerated is 1.22 times less risky than First Trust. It trades about 0.0 of its potential returns per unit of risk. First Trust IndustrialsProducer is currently generating about -0.09 per unit of risk. If you would invest  3,762  in Innovator Growth 100 Accelerated on December 30, 2024 and sell it today you would lose (7.00) from holding Innovator Growth 100 Accelerated or give up 0.19% of portfolio value over 90 days.

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

Innovator Growth 100 Accelerat  vs.  First Trust IndustrialsProduce

Innovator Growth 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Growth 100 Accelerated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Innovator Growth is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Industri

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust IndustrialsProducer has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

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 IndustrialsProducer 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.