Correlation Between Invesco DB and Innovator Capital

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

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

Diversification Opportunities for Invesco DB and Innovator Capital

0.95

Correlation Coefficient

Invesco DB  Innovator Capital

Almost no diversification

The 3 months correlation between Invesco and Innovator is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Dollar and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital and Invesco DB 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 Invesco DB Dollar are associated (or correlated) with Innovator Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Capital has no effect on the direction of Invesco DB i.e., Invesco DB and Innovator Capital go up and down completely randomly.

Pair Corralation between Invesco DB and Innovator Capital

Considering the 90-day investment horizon Invesco DB is expected to generate 4.1 times less return on investment than Innovator Capital. But when comparing it to its historical volatility, Invesco DB Dollar is 1.41 times less risky than Innovator Capital. It trades about 0.07 of its potential returns per unit of risk. Innovator Capital Management is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,697  in Innovator Capital Management on September 21, 2024 and sell it today you would earn a total of  490.00  from holding Innovator Capital Management or generate 18.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	28.02%
Values	Daily Returns

Invesco DB Dollar  vs.  Innovator Capital Management

Invesco DB Dollar

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Dollar are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Invesco DB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Innovator Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Innovator Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco DB and Innovator Capital

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

The idea behind Invesco DB Dollar and Innovator Capital Management 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.