Correlation Between Innovator and Innovator ETFs

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

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

Diversification Opportunities for Innovator and Innovator ETFs

0.81

Correlation Coefficient

Innovator  Innovator ETFs

Very poor diversification

The 3 months correlation between Innovator and Innovator is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Innovator 20 Year and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs Trust and Innovator 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 20 Year are associated (or correlated) with Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of Innovator i.e., Innovator and Innovator ETFs go up and down completely randomly.

Pair Corralation between Innovator and Innovator ETFs

Given the investment horizon of 90 days Innovator is expected to generate 2.34 times less return on investment than Innovator ETFs. But when comparing it to its historical volatility, Innovator 20 Year is 1.02 times less risky than Innovator ETFs. It trades about 0.09 of its potential returns per unit of risk. Innovator ETFs Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,866  in Innovator ETFs Trust on December 22, 2024 and sell it today you would earn a total of  186.00  from holding Innovator ETFs Trust or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Innovator 20 Year  vs.  Innovator ETFs Trust

Innovator 20 Year

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator 20 Year are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

Innovator ETFs Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Innovator ETFs may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Innovator and Innovator ETFs

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

The idea behind Innovator 20 Year and Innovator ETFs Trust 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.