Correlation Between Innovator and IShares Large

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

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

Diversification Opportunities for Innovator and IShares Large

0.99

Correlation Coefficient

Innovator  IShares Large

No risk reduction

The 3 months correlation between Innovator and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and iShares Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Large Cap and Innovator 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 SP 500 are associated (or correlated) with IShares Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Large Cap has no effect on the direction of Innovator i.e., Innovator and IShares Large go up and down completely randomly.

Pair Corralation between Innovator and IShares Large

Given the investment horizon of 90 days Innovator SP 500 is expected to generate 1.45 times more return on investment than IShares Large. However, Innovator is 1.45 times more volatile than iShares Large Cap. It trades about 0.14 of its potential returns per unit of risk. iShares Large Cap is currently generating about 0.13 per unit of risk. If you would invest  3,986  in Innovator SP 500 on August 30, 2024 and sell it today you would earn a total of  146.00  from holding Innovator SP 500 or generate 3.66% return on investment over 90 days.

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

Innovator SP 500  vs.  iShares Large Cap

Innovator SP 500

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Innovator is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Large Cap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares Large is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Innovator and IShares Large

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

The idea behind Innovator SP 500 and iShares Large Cap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.