Correlation Between IShares Core and Innovator Capital

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

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

Diversification Opportunities for IShares Core and Innovator Capital

0.52

Correlation Coefficient

IShares Core  Innovator Capital

Very weak diversification

The 3 months correlation between IShares and Innovator is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital and IShares Core 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 iShares Core SP are associated (or correlated) with Innovator Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Capital has no effect on the direction of IShares Core i.e., IShares Core and Innovator Capital go up and down completely randomly.

Pair Corralation between IShares Core and Innovator Capital

Considering the 90-day investment horizon IShares Core is expected to generate 1.21 times less return on investment than Innovator Capital. In addition to that, IShares Core is 1.98 times more volatile than Innovator Capital Management. It trades about 0.18 of its total potential returns per unit of risk. Innovator Capital Management is currently generating about 0.43 per unit of volatility. If you would invest  2,830  in Innovator Capital Management on September 14, 2024 and sell it today you would earn a total of  62.00  from holding Innovator Capital Management or generate 2.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	23.81%
Values	Daily Returns

iShares Core SP  vs.  Innovator Capital Management

iShares Core SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Innovator Capital

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Innovator Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak essential indicators, Innovator Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Innovator Capital

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

The idea behind iShares Core SP and Innovator Capital Management 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.