Correlation Between FT Vest and Innovator

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

By analyzing existing cross correlation between FT Vest Equity and Innovator SP 500, you can compare the effects of market volatilities on FT Vest and Innovator 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 Vest with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and Innovator.

Diversification Opportunities for FT Vest and Innovator

-0.5

Correlation Coefficient

FT Vest  Innovator

Very good diversification

The 3 months correlation between DHDG and Innovator is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 and FT Vest 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 Vest Equity are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of FT Vest i.e., FT Vest and Innovator go up and down completely randomly.

Pair Corralation between FT Vest and Innovator

Given the investment horizon of 90 days FT Vest Equity is expected to generate 3.08 times more return on investment than Innovator. However, FT Vest is 3.08 times more volatile than Innovator SP 500. It trades about 0.18 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.29 per unit of risk. If you would invest  3,038  in FT Vest Equity on September 2, 2024 and sell it today you would earn a total of  65.00  from holding FT Vest Equity or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.88%
Values	Daily Returns

FT Vest Equity  vs.  Innovator SP 500

FT Vest Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Innovator SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Innovator is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FT Vest and Innovator

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

The idea behind FT Vest Equity and Innovator SP 500 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.