Correlation Between Innovator MSCI and Innovator

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

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

Diversification Opportunities for Innovator MSCI and Innovator

-0.63

Correlation Coefficient

Innovator MSCI  Innovator

Excellent diversification

The 3 months correlation between Innovator and Innovator is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Innovator MSCI EAFE 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 Innovator MSCI 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 MSCI EAFE 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 Innovator MSCI i.e., Innovator MSCI and Innovator go up and down completely randomly.

Pair Corralation between Innovator MSCI and Innovator

Given the investment horizon of 90 days Innovator MSCI EAFE is expected to under-perform the Innovator. In addition to that, Innovator MSCI is 1.63 times more volatile than Innovator SP 500. It trades about -0.06 of its total potential returns per unit of risk. Innovator SP 500 is currently generating about 0.2 per unit of volatility. If you would invest  3,791  in Innovator SP 500 on September 12, 2024 and sell it today you would earn a total of  145.00  from holding Innovator SP 500 or generate 3.82% return on investment over 90 days.

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

Innovator MSCI EAFE  vs.  Innovator SP 500

Innovator MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Innovator MSCI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Innovator SP 500

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Innovator is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Innovator MSCI and Innovator

The main advantage of trading using opposite Innovator MSCI and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator MSCI 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 Innovator MSCI EAFE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..