Correlation Between Innovator ETFs and IShares Russell

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

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

Diversification Opportunities for Innovator ETFs and IShares Russell

0.89

Correlation Coefficient

Innovator ETFs  IShares Russell

Very poor diversification

The 3 months correlation between Innovator and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and iShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2000 and Innovator ETFs 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 ETFs Trust are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2000 has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and IShares Russell go up and down completely randomly.

Pair Corralation between Innovator ETFs and IShares Russell

Given the investment horizon of 90 days Innovator ETFs is expected to generate 3.39 times less return on investment than IShares Russell. But when comparing it to its historical volatility, Innovator ETFs Trust is 4.24 times less risky than IShares Russell. It trades about 0.3 of its potential returns per unit of risk. iShares Russell 2000 is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,348  in iShares Russell 2000 on September 2, 2024 and sell it today you would earn a total of  504.00  from holding iShares Russell 2000 or generate 11.59% return on investment over 90 days.

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

Innovator ETFs Trust  vs.  iShares Russell 2000

Innovator ETFs Trust

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, Innovator ETFs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Russell 2000

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2000 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Innovator ETFs and IShares Russell

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

The idea behind Innovator ETFs Trust and iShares Russell 2000 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.