Correlation Between Innovator Russell and Innovator MSCI

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

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

Diversification Opportunities for Innovator Russell and Innovator MSCI

-0.53

Correlation Coefficient

Innovator Russell  Innovator MSCI

Excellent diversification

The 3 months correlation between Innovator and Innovator is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 and Innovator MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator MSCI EAFE and Innovator Russell 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 Russell 2000 are associated (or correlated) with Innovator MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator MSCI EAFE has no effect on the direction of Innovator Russell i.e., Innovator Russell and Innovator MSCI go up and down completely randomly.

Pair Corralation between Innovator Russell and Innovator MSCI

Given the investment horizon of 90 days Innovator Russell 2000 is expected to generate 1.51 times more return on investment than Innovator MSCI. However, Innovator Russell is 1.51 times more volatile than Innovator MSCI EAFE. It trades about 0.03 of its potential returns per unit of risk. Innovator MSCI EAFE is currently generating about -0.22 per unit of risk. If you would invest  3,707  in Innovator Russell 2000 on September 29, 2024 and sell it today you would earn a total of  54.00  from holding Innovator Russell 2000 or generate 1.46% return on investment over 90 days.

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

Innovator Russell 2000  vs.  Innovator MSCI EAFE

Innovator Russell 2000

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Russell 2000 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Innovator Russell is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Innovator Russell and Innovator MSCI

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

The idea behind Innovator Russell 2000 and Innovator MSCI EAFE 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.