Correlation Between Innovator Growth and TappAlpha SPY

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

By analyzing existing cross correlation between Innovator Growth 100 Accelerated and TappAlpha SPY Growth, you can compare the effects of market volatilities on Innovator Growth and TappAlpha SPY 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 Growth with a short position of TappAlpha SPY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Growth and TappAlpha SPY.

Diversification Opportunities for Innovator Growth and TappAlpha SPY

0.69

Correlation Coefficient

Innovator Growth  TappAlpha SPY

Poor diversification

The 3 months correlation between Innovator and TappAlpha is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat and TappAlpha SPY Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TappAlpha SPY Growth and Innovator Growth 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 Growth 100 Accelerated are associated (or correlated) with TappAlpha SPY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TappAlpha SPY Growth has no effect on the direction of Innovator Growth i.e., Innovator Growth and TappAlpha SPY go up and down completely randomly.

Pair Corralation between Innovator Growth and TappAlpha SPY

Given the investment horizon of 90 days Innovator Growth 100 Accelerated is expected to generate 0.66 times more return on investment than TappAlpha SPY. However, Innovator Growth 100 Accelerated is 1.51 times less risky than TappAlpha SPY. It trades about 0.15 of its potential returns per unit of risk. TappAlpha SPY Growth is currently generating about -0.21 per unit of risk. If you would invest  3,432  in Innovator Growth 100 Accelerated on October 10, 2024 and sell it today you would earn a total of  69.00  from holding Innovator Growth 100 Accelerated or generate 2.01% return on investment over 90 days.

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

Innovator Growth 100 Accelerat  vs.  TappAlpha SPY Growth

Innovator Growth 100

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Growth 100 Accelerated are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Innovator Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TappAlpha SPY Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TappAlpha SPY Growth are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, TappAlpha SPY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Innovator Growth and TappAlpha SPY

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

The idea behind Innovator Growth 100 Accelerated and TappAlpha SPY Growth 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.