Correlation Between Strategy Shares and Innovator

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

By analyzing existing cross correlation between Strategy Shares NewfoundReSolve and Innovator 20 Year, you can compare the effects of market volatilities on Strategy Shares 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 Strategy Shares with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategy Shares and Innovator.

Diversification Opportunities for Strategy Shares and Innovator

0.22

Correlation Coefficient

Strategy Shares  Innovator

Modest diversification

The 3 months correlation between Strategy and Innovator is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares NewfoundReSolv and Innovator 20 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator 20 Year and Strategy Shares 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 Strategy Shares NewfoundReSolve 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 20 Year has no effect on the direction of Strategy Shares i.e., Strategy Shares and Innovator go up and down completely randomly.

Pair Corralation between Strategy Shares and Innovator

Given the investment horizon of 90 days Strategy Shares NewfoundReSolve is expected to generate 2.23 times more return on investment than Innovator. However, Strategy Shares is 2.23 times more volatile than Innovator 20 Year. It trades about 0.02 of its potential returns per unit of risk. Innovator 20 Year is currently generating about -0.04 per unit of risk. If you would invest  3,204  in Strategy Shares NewfoundReSolve on October 22, 2024 and sell it today you would earn a total of  9.10  from holding Strategy Shares NewfoundReSolve or generate 0.28% return on investment over 90 days.

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

Strategy Shares NewfoundReSolv  vs.  Innovator 20 Year

Strategy Shares Newf

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares NewfoundReSolve are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Strategy Shares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Innovator 20 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking indicators, Innovator is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Strategy Shares and Innovator

The main advantage of trading using opposite Strategy Shares and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategy Shares 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 Strategy Shares NewfoundReSolve and Innovator 20 Year 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.