Correlation Between Innovator ETFs and ETF Series

Can any of the company-specific risk be diversified away by investing in both Innovator ETFs and ETF Series 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 ETF Series 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 ETF Series Solutions, you can compare the effects of market volatilities on Innovator ETFs and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and ETF Series.

Diversification Opportunities for Innovator ETFs and ETF Series

0.76

Correlation Coefficient

Innovator ETFs  ETF Series

Poor diversification

The 3 months correlation between Innovator and ETF is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and ETF Series go up and down completely randomly.

Pair Corralation between Innovator ETFs and ETF Series

Given the investment horizon of 90 days Innovator ETFs Trust is expected to generate 0.78 times more return on investment than ETF Series. However, Innovator ETFs Trust is 1.28 times less risky than ETF Series. It trades about -0.07 of its potential returns per unit of risk. ETF Series Solutions is currently generating about -0.13 per unit of risk. If you would invest  2,773  in Innovator ETFs Trust on December 29, 2024 and sell it today you would lose (102.00) from holding Innovator ETFs Trust or give up 3.68% of portfolio value over 90 days.

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

Innovator ETFs Trust  vs.  ETF Series Solutions

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.

ETF Series Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETF Series Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Innovator ETFs and ETF Series

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

The idea behind Innovator ETFs Trust and ETF Series Solutions 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.