Correlation Between SPACE and Innovator

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

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

Diversification Opportunities for SPACE and Innovator

0.78

Correlation Coefficient

SPACE  Innovator

Poor diversification

The 3 months correlation between SPACE and Innovator is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPACE 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 SPACE 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 SPACE 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 SPACE i.e., SPACE and Innovator go up and down completely randomly.

Pair Corralation between SPACE and Innovator

Assuming the 90 days horizon SPACE is expected to generate 26.61 times more return on investment than Innovator. However, SPACE is 26.61 times more volatile than Innovator SP 500. It trades about 0.21 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.28 per unit of risk. If you would invest  33.00  in SPACE on September 2, 2024 and sell it today you would earn a total of  26.00  from holding SPACE or generate 78.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.97%
Values	Daily Returns

SPACE  vs.  Innovator SP 500

SPACE

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPACE and Innovator

The main advantage of trading using opposite SPACE and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE 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 SPACE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.