Correlation Between Innovator Premium and SSgA SPDR

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

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

Diversification Opportunities for Innovator Premium and SSgA SPDR

0.71

Correlation Coefficient

Innovator Premium  SSgA SPDR

Poor diversification

The 3 months correlation between Innovator and SSgA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Premium Income and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Innovator Premium 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 Premium Income are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Innovator Premium i.e., Innovator Premium and SSgA SPDR go up and down completely randomly.

Pair Corralation between Innovator Premium and SSgA SPDR

Given the investment horizon of 90 days Innovator Premium is expected to generate 2.49 times less return on investment than SSgA SPDR. But when comparing it to its historical volatility, Innovator Premium Income is 7.68 times less risky than SSgA SPDR. It trades about 0.16 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,936  in SSgA SPDR ETFs on September 30, 2024 and sell it today you would earn a total of  1,713  from holding SSgA SPDR ETFs or generate 21.59% return on investment over 90 days.

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

Innovator Premium Income  vs.  SSgA SPDR ETFs

Innovator Premium Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Premium Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Innovator Premium is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

SSgA SPDR ETFs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Innovator Premium and SSgA SPDR

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

The idea behind Innovator Premium Income and SSgA SPDR ETFs 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.