Correlation Between Microsectors Gold and Innovator

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

By analyzing existing cross correlation between Microsectors Gold 3x and Innovator SP 500, you can compare the effects of market volatilities on Microsectors Gold and Innovator 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 Microsectors Gold with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsectors Gold and Innovator.

Diversification Opportunities for Microsectors Gold and Innovator

-0.44

Correlation Coefficient

Microsectors Gold  Innovator

Very good diversification

The 3 months correlation between Microsectors and Innovator is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsectors Gold 3x and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 and Microsectors Gold 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 Microsectors Gold 3x are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Microsectors Gold i.e., Microsectors Gold and Innovator go up and down completely randomly.

Pair Corralation between Microsectors Gold and Innovator

Given the investment horizon of 90 days Microsectors Gold 3x is expected to generate 5.38 times more return on investment than Innovator. However, Microsectors Gold is 5.38 times more volatile than Innovator SP 500. It trades about 0.1 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.05 per unit of risk. If you would invest  3,644  in Microsectors Gold 3x on February 19, 2025 and sell it today you would earn a total of  3,551  from holding Microsectors Gold 3x or generate 97.45% return on investment over 90 days.

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

Microsectors Gold 3x  vs.  Innovator SP 500

Microsectors Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsectors Gold 3x are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Microsectors Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Innovator SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Innovator is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Microsectors Gold and Innovator

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

The idea behind Microsectors Gold 3x and Innovator SP 500 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.