Correlation Between ETF Series and Innovator Capital

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

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

Diversification Opportunities for ETF Series and Innovator Capital

0.61

Correlation Coefficient

ETF Series  Innovator Capital

Poor diversification

The 3 months correlation between ETF and Innovator is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital and ETF Series 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 ETF Series Solutions 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 ETF Series i.e., ETF Series and Innovator Capital go up and down completely randomly.

Pair Corralation between ETF Series and Innovator Capital

Given the investment horizon of 90 days ETF Series Solutions is expected to generate 3.37 times more return on investment than Innovator Capital. However, ETF Series is 3.37 times more volatile than Innovator Capital Management. It trades about 0.28 of its potential returns per unit of risk. Innovator Capital Management is currently generating about 0.39 per unit of risk. If you would invest  3,308  in ETF Series Solutions on September 13, 2024 and sell it today you would earn a total of  699.00  from holding ETF Series Solutions or generate 21.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.4%
Values	Daily Returns

ETF Series Solutions  vs.  Innovator Capital Management

ETF Series Solutions

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, ETF Series displayed solid returns over the last few months and may actually be approaching a breakup point.

Innovator Capital

Risk-Adjusted Performance

0 of 100

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 inconsistent essential indicators, Innovator Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ETF Series and Innovator Capital

The main advantage of trading using opposite ETF Series and Innovator Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series 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 ETF Series Solutions 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.