Can any of the company-specific risk be diversified away by investing in both Innovator and Innovator ETFs 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 and Innovator ETFs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator SP 500 and Innovator ETFs Trust, you can compare the effects of market volatilities on Innovator and Innovator ETFs 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 with a short position of Innovator ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Innovator ETFs.
Diversification Opportunities for Innovator and Innovator ETFs
The 3 months correlation between Innovator and Innovator is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs Trust and Innovator 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 SP 500 are associated (or correlated) with Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of Innovator i.e., Innovator and Innovator ETFs go up and down completely randomly.
Pair Corralation between Innovator and Innovator ETFs
Given the investment horizon of 90 days Innovator SP 500 is expected to generate 3.41 times more return on investment than Innovator ETFs. However, Innovator is 3.41 times more volatile than Innovator ETFs Trust. It trades about 0.31 of its potential returns per unit of risk. Innovator ETFs Trust is currently generating about 0.56 per unit of risk. If you would invest 3,315 in Innovator SP 500 on March 6, 2024 and sell it today you would earn a total of 46.00 from holding Innovator SP 500 or generate 1.39% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Innovator is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Innovator ETFs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.