Correlation Between FT Cboe and Innovator Russell

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

By analyzing existing cross correlation between FT Cboe Vest and Innovator Russell 2000, you can compare the effects of market volatilities on FT Cboe and Innovator Russell 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 FT Cboe with a short position of Innovator Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Innovator Russell.

Diversification Opportunities for FT Cboe and Innovator Russell

0.94

Correlation Coefficient

FT Cboe  Innovator Russell

Almost no diversification

The 3 months correlation between BUFD and Innovator is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Innovator Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Russell 2000 and FT Cboe 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 FT Cboe Vest are associated (or correlated) with Innovator Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Russell 2000 has no effect on the direction of FT Cboe i.e., FT Cboe and Innovator Russell go up and down completely randomly.

Pair Corralation between FT Cboe and Innovator Russell

Given the investment horizon of 90 days FT Cboe is expected to generate 1.84 times less return on investment than Innovator Russell. But when comparing it to its historical volatility, FT Cboe Vest is 2.27 times less risky than Innovator Russell. It trades about 0.22 of its potential returns per unit of risk. Innovator Russell 2000 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,174  in Innovator Russell 2000 on September 2, 2024 and sell it today you would earn a total of  251.00  from holding Innovator Russell 2000 or generate 7.91% return on investment over 90 days.

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

FT Cboe Vest  vs.  Innovator Russell 2000

FT Cboe Vest

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Innovator Russell 2000

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Russell 2000 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Innovator Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FT Cboe and Innovator Russell

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

The idea behind FT Cboe Vest and Innovator Russell 2000 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.