Correlation Between Vanguard Large and Innovator Capital

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

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

Diversification Opportunities for Vanguard Large and Innovator Capital

0.88

Correlation Coefficient

Vanguard Large  Innovator Capital

Very poor diversification

The 3 months correlation between Vanguard and Innovator is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital and Vanguard Large 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 Vanguard Large Cap Index 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 Vanguard Large i.e., Vanguard Large and Innovator Capital go up and down completely randomly.

Pair Corralation between Vanguard Large and Innovator Capital

Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 2.01 times more return on investment than Innovator Capital. However, Vanguard Large is 2.01 times more volatile than Innovator Capital Management. It trades about 0.12 of its potential returns per unit of risk. Innovator Capital Management is currently generating about 0.23 per unit of risk. If you would invest  16,983  in Vanguard Large Cap Index on September 20, 2024 and sell it today you would earn a total of  10,022  from holding Vanguard Large Cap Index or generate 59.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	28.23%
Values	Daily Returns

Vanguard Large Cap Index  vs.  Innovator Capital Management

Vanguard Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Vanguard Large and Innovator Capital

The main advantage of trading using opposite Vanguard Large and Innovator Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large 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 Vanguard Large Cap Index 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.