Correlation Between Innovator ETFs and Avantis Emerging

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

By analyzing existing cross correlation between Innovator ETFs Trust and Avantis Emerging Markets, you can compare the effects of market volatilities on Innovator ETFs and Avantis Emerging 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 ETFs with a short position of Avantis Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and Avantis Emerging.

Diversification Opportunities for Innovator ETFs and Avantis Emerging

0.45

Correlation Coefficient

Innovator ETFs  Avantis Emerging

Very weak diversification

The 3 months correlation between Innovator and Avantis is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets and Innovator ETFs 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 ETFs Trust are associated (or correlated) with Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and Avantis Emerging go up and down completely randomly.

Pair Corralation between Innovator ETFs and Avantis Emerging

Given the investment horizon of 90 days Innovator ETFs Trust is expected to under-perform the Avantis Emerging. But the etf apears to be less risky and, when comparing its historical volatility, Innovator ETFs Trust is 1.15 times less risky than Avantis Emerging. The etf trades about -0.06 of its potential returns per unit of risk. The Avantis Emerging Markets is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,968  in Avantis Emerging Markets on December 30, 2024 and sell it today you would lose (77.00) from holding Avantis Emerging Markets or give up 1.55% of portfolio value over 90 days.

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

Innovator ETFs Trust  vs.  Avantis Emerging Markets

Innovator ETFs Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator ETFs Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, Innovator ETFs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Avantis Emerging Markets

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Innovator ETFs and Avantis Emerging

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

The idea behind Innovator ETFs Trust and Avantis Emerging Markets 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.