Correlation Between Innovator and Schwab Long-Term

By analyzing existing cross correlation between Innovator 20 Yr and Schwab Long-Term US, you can compare the effects of market volatilities on Innovator and Schwab Long-Term 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 Schwab Long-Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and Schwab Long-Term.
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Can any of the company-specific risk be diversified away by investing in both Innovator and Schwab Long-Term 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 Schwab Long-Term into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Innovator and Schwab Long-Term

0.86
  Correlation Coefficient
Innovator 20 Yr
Schwab Long-Term

Very poor diversification

The 3 months correlation between Innovator and Schwab is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Innovator 20 Yr and Schwab Long-Term US in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Schwab Long-Term 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 20 Yr are associated (or correlated) with Schwab Long-Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Long-Term has no effect on the direction of Innovator i.e., Innovator and Schwab Long-Term go up and down completely randomly.

Pair Corralation between Innovator and Schwab Long-Term

Given the investment horizon of 90 days Innovator 20 Yr is expected to generate 0.53 times more return on investment than Schwab Long-Term. However, Innovator 20 Yr is 1.87 times less risky than Schwab Long-Term. It trades about -0.15 of its potential returns per unit of risk. Schwab Long-Term US is currently generating about -0.15 per unit of risk. If you would invest  2,445  in Innovator 20 Yr on October 31, 2021 and sell it today you would lose (37.00)  from holding Innovator 20 Yr or give up 1.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Innovator 20 Yr  vs.  Schwab Long-Term US

 Performance (%) 
      Timeline 
Innovator 20 Yr 
Innovator Performance
0 of 100
Over the last 90 days Innovator 20 Yr has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, Innovator is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

Innovator Price Channel

Schwab Long-Term 
Schwab Performance
0 of 100
Over the last 90 days Schwab Long-Term US has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Schwab Long-Term is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

Schwab Price Channel

Innovator and Schwab Long-Term Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Innovator and Schwab Long-Term

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

Innovator 20 Yr

Pair trading matchups for Innovator

The idea behind Innovator 20 Yr and Schwab Long-Term US 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.

Schwab Long-Term US

Pair trading matchups for Schwab Long-Term

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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