Correlation Between Innovator Nasdaq and Innovator MSCI

Can any of the company-specific risk be diversified away by investing in both Innovator Nasdaq 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 Nasdaq 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 Nasdaq 100 Power and Innovator MSCI EAFE, you can compare the effects of market volatilities on Innovator Nasdaq 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 Nasdaq with a short position of Innovator MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Nasdaq and Innovator MSCI.

Diversification Opportunities for Innovator Nasdaq and Innovator MSCI

-0.85

Correlation Coefficient

Innovator Nasdaq  Innovator MSCI

Pay attention - limited upside

The 3 months correlation between Innovator and Innovator is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Nasdaq 100 Power 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 Nasdaq 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 Nasdaq 100 Power 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 Nasdaq i.e., Innovator Nasdaq and Innovator MSCI go up and down completely randomly.

Pair Corralation between Innovator Nasdaq and Innovator MSCI

Given the investment horizon of 90 days Innovator Nasdaq 100 Power is expected to generate 0.4 times more return on investment than Innovator MSCI. However, Innovator Nasdaq 100 Power is 2.49 times less risky than Innovator MSCI. It trades about 0.22 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  4,646  in Innovator Nasdaq 100 Power on September 29, 2024 and sell it today you would earn a total of  155.00  from holding Innovator Nasdaq 100 Power or generate 3.34% return on investment over 90 days.

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

Innovator Nasdaq 100 Power  vs.  Innovator MSCI EAFE

Innovator Nasdaq 100

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Nasdaq 100 Power are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Innovator Nasdaq is not utilizing all of its potentials. The current 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 Nasdaq and Innovator MSCI

The main advantage of trading using opposite Innovator Nasdaq and Innovator MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Nasdaq 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 Nasdaq 100 Power 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .