Correlation Between Innovator ETFs and NATO

Can any of the company-specific risk be diversified away by investing in both Innovator ETFs and NATO 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 NATO 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 NATO, you can compare the effects of market volatilities on Innovator ETFs and NATO 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 NATO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator ETFs and NATO.

Diversification Opportunities for Innovator ETFs and NATO

0.78

Correlation Coefficient

Innovator ETFs  NATO

Poor diversification

The 3 months correlation between Innovator and NATO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and NATO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATO 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 NATO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATO has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and NATO go up and down completely randomly.

Pair Corralation between Innovator ETFs and NATO

Given the investment horizon of 90 days Innovator ETFs Trust is expected to generate 0.42 times more return on investment than NATO. However, Innovator ETFs Trust is 2.37 times less risky than NATO. It trades about 0.09 of its potential returns per unit of risk. NATO is currently generating about 0.02 per unit of risk. If you would invest  2,872  in Innovator ETFs Trust on September 24, 2024 and sell it today you would earn a total of  79.00  from holding Innovator ETFs Trust or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.0%
Values	Daily Returns

Innovator ETFs Trust  vs.  NATO

Innovator ETFs Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Innovator ETFs is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

NATO

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NATO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NATO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Innovator ETFs and NATO

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

The idea behind Innovator ETFs Trust and NATO 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.