Correlation Between Innovator ETFs and Invesco SP

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

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

Diversification Opportunities for Innovator ETFs and Invesco SP

0.94

Correlation Coefficient

Innovator ETFs  Invesco SP

Almost no diversification

The 3 months correlation between Innovator and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and Innovator ETFs 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 ETFs Trust are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and Invesco SP go up and down completely randomly.

Pair Corralation between Innovator ETFs and Invesco SP

Given the investment horizon of 90 days Innovator ETFs is expected to generate 2.1 times less return on investment than Invesco SP. But when comparing it to its historical volatility, Innovator ETFs Trust is 3.19 times less risky than Invesco SP. It trades about 0.24 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,926  in Invesco SP 500 on September 14, 2024 and sell it today you would earn a total of  422.00  from holding Invesco SP 500 or generate 8.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.88%
Values	Daily Returns

Innovator ETFs Trust  vs.  Invesco SP 500

Innovator ETFs Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, Innovator ETFs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco SP 500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovator ETFs and Invesco SP

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

The idea behind Innovator ETFs Trust and Invesco 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.