Correlation Between Innovator Equity and IShares ESG

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

By analyzing existing cross correlation between Innovator Equity Accelerated and iShares ESG Screened, you can compare the effects of market volatilities on Innovator Equity and IShares ESG 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 Equity with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Equity and IShares ESG.

Diversification Opportunities for Innovator Equity and IShares ESG

0.53

Correlation Coefficient

Innovator Equity  IShares ESG

Very weak diversification

The 3 months correlation between Innovator and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Equity Accelerated and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened and Innovator Equity 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 Equity Accelerated are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Innovator Equity i.e., Innovator Equity and IShares ESG go up and down completely randomly.

Pair Corralation between Innovator Equity and IShares ESG

Given the investment horizon of 90 days Innovator Equity Accelerated is expected to generate 0.23 times more return on investment than IShares ESG. However, Innovator Equity Accelerated is 4.32 times less risky than IShares ESG. It trades about 0.14 of its potential returns per unit of risk. iShares ESG Screened is currently generating about -0.02 per unit of risk. If you would invest  3,348  in Innovator Equity Accelerated on October 12, 2024 and sell it today you would earn a total of  69.00  from holding Innovator Equity Accelerated or generate 2.06% return on investment over 90 days.

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

Innovator Equity Accelerated  vs.  iShares ESG Screened

Innovator Equity Acc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Accelerated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

iShares ESG Screened

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG Screened has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, IShares ESG is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Innovator Equity and IShares ESG

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

The idea behind Innovator Equity Accelerated and iShares ESG Screened 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.