Correlation Between Innovator and SPDR Barclays

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

Diversification Opportunities for Innovator and SPDR Barclays

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Innovator and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Innovator 20 Year and SPDR Barclays Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Long 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 Year are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Long has no effect on the direction of Innovator i.e., Innovator and SPDR Barclays go up and down completely randomly.

Pair Corralation between Innovator and SPDR Barclays

Given the investment horizon of 90 days Innovator is expected to generate 1.44 times less return on investment than SPDR Barclays. But when comparing it to its historical volatility, Innovator 20 Year is 1.48 times less risky than SPDR Barclays. It trades about 0.12 of its potential returns per unit of risk. SPDR Barclays Long is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,750  in SPDR Barclays Long on December 30, 2023 and sell it today you would earn a total of  44.00  from holding SPDR Barclays Long or generate 1.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Innovator 20 Year  vs.  SPDR Barclays Long

 Performance 
       Timeline  
Innovator 20 Year 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Innovator 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking indicators, Innovator is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
SPDR Barclays Long 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days SPDR Barclays Long has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR Barclays is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Innovator and SPDR Barclays Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Innovator and SPDR Barclays

The main advantage of trading using opposite Innovator and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator position performs unexpectedly, SPDR Barclays 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 SPDR Barclays will offset losses from the drop in SPDR Barclays' long position.
The idea behind Innovator 20 Year and SPDR Barclays Long 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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