Correlation Between Innovator Growth and IShares ESG

Can any of the company-specific risk be diversified away by investing in both Innovator Growth 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 Growth 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 Growth 100 Accelerated and iShares ESG Screened, you can compare the effects of market volatilities on Innovator Growth 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 Growth with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Growth and IShares ESG.

Diversification Opportunities for Innovator Growth and IShares ESG

0.91

Correlation Coefficient

Innovator Growth  IShares ESG

Almost no diversification

The 3 months correlation between Innovator and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat 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 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 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 Growth i.e., Innovator Growth and IShares ESG go up and down completely randomly.

Pair Corralation between Innovator Growth and IShares ESG

Given the investment horizon of 90 days Innovator Growth 100 Accelerated is expected to generate 1.21 times more return on investment than IShares ESG. However, Innovator Growth is 1.21 times more volatile than iShares ESG Screened. It trades about -0.06 of its potential returns per unit of risk. iShares ESG Screened is currently generating about -0.07 per unit of risk. If you would invest  3,431  in Innovator Growth 100 Accelerated on December 20, 2024 and sell it today you would lose (171.00) from holding Innovator Growth 100 Accelerated or give up 4.98% of portfolio value over 90 days.

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

Innovator Growth 100 Accelerat  vs.  iShares ESG Screened

Innovator Growth 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Growth 100 Accelerated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Innovator Growth 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

Very Weak

Over the last 90 days iShares ESG Screened has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Innovator Growth and IShares ESG

The main advantage of trading using opposite Innovator Growth and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Growth 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 Growth 100 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..