Correlation Between Innovator and Innovator Russell

Can any of the company-specific risk be diversified away by investing in both Innovator and Innovator 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 and Innovator Russell 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 Innovator Russell 2000, you can compare the effects of market volatilities on Innovator and Innovator 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 with a short position of Innovator Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Innovator Russell.

Diversification Opportunities for Innovator and Innovator Russell

0.92

Correlation Coefficient

Innovator  Innovator Russell

Almost no diversification

The 3 months correlation between Innovator and Innovator is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and Innovator Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Russell 2000 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 Innovator Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Russell 2000 has no effect on the direction of Innovator i.e., Innovator and Innovator Russell go up and down completely randomly.

Pair Corralation between Innovator and Innovator Russell

Given the investment horizon of 90 days Innovator is expected to generate 4.62 times less return on investment than Innovator Russell. But when comparing it to its historical volatility, Innovator SP 500 is 5.69 times less risky than Innovator Russell. It trades about 0.46 of its potential returns per unit of risk. Innovator Russell 2000 is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  3,689  in Innovator Russell 2000 on September 1, 2024 and sell it today you would earn a total of  263.00  from holding Innovator Russell 2000 or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Innovator SP 500  vs.  Innovator Russell 2000

Innovator SP 500

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Innovator is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Innovator Russell 2000

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Russell 2000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Innovator Russell may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Innovator and Innovator Russell

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

The idea behind Innovator SP 500 and Innovator 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.