Correlation Between Innovator and Exchange Listed

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Can any of the company-specific risk be diversified away by investing in both Innovator and Exchange Listed 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 Exchange Listed 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 Exchange Listed Funds, you can compare the effects of market volatilities on Innovator and Exchange Listed 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 Exchange Listed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Exchange Listed.

Diversification Opportunities for Innovator and Exchange Listed

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Innovator and Exchange is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Innovator 20 Year and Exchange Listed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Listed Funds 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 Exchange Listed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Listed Funds has no effect on the direction of Innovator i.e., Innovator and Exchange Listed go up and down completely randomly.

Pair Corralation between Innovator and Exchange Listed

Given the investment horizon of 90 days Innovator is expected to generate 49.64 times less return on investment than Exchange Listed. But when comparing it to its historical volatility, Innovator 20 Year is 1.2 times less risky than Exchange Listed. It trades about 0.0 of its potential returns per unit of risk. Exchange Listed Funds is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,794  in Exchange Listed Funds on October 3, 2024 and sell it today you would earn a total of  1,010  from holding Exchange Listed Funds or generate 14.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Innovator 20 Year  vs.  Exchange Listed Funds

 Performance 
       Timeline  
Innovator 20 Year 

Risk-Adjusted Performance

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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.
Exchange Listed Funds 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Exchange Listed Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Exchange Listed is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Innovator and Exchange Listed Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Innovator and Exchange Listed

The main advantage of trading using opposite Innovator and Exchange Listed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, Exchange Listed 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 Exchange Listed will offset losses from the drop in Exchange Listed's long position.
The idea behind Innovator 20 Year and Exchange Listed Funds 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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