Correlation Between First Trust and AIM ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and AIM ETF 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 First Trust and AIM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Cboe and AIM ETF Products, you can compare the effects of market volatilities on First Trust and AIM ETF 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 First Trust with a short position of AIM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and AIM ETF.
Diversification Opportunities for First Trust and AIM ETF
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and AIM is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cboe and AIM ETF Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIM ETF Products and First Trust 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 First Trust Cboe are associated (or correlated) with AIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIM ETF Products has no effect on the direction of First Trust i.e., First Trust and AIM ETF go up and down completely randomly.
Pair Corralation between First Trust and AIM ETF
Given the investment horizon of 90 days First Trust is expected to generate 1.1 times less return on investment than AIM ETF. But when comparing it to its historical volatility, First Trust Cboe is 1.01 times less risky than AIM ETF. It trades about 0.18 of its potential returns per unit of risk. AIM ETF Products is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,738 in AIM ETF Products on August 25, 2024 and sell it today you would earn a total of 46.00 from holding AIM ETF Products or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Cboe vs. AIM ETF Products
Performance |
| Timeline |
| First Trust Cboe |
| AIM ETF Products |
First Trust and AIM ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and AIM ETF
The main advantage of trading using opposite First Trust and AIM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, AIM ETF 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 AIM ETF will offset losses from the drop in AIM ETF's long position.| First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
| AIM ETF vs. FT Vest Equity | AIM ETF vs. Northern Lights | AIM ETF vs. Dimensional International High | AIM ETF vs. First Trust Exchange Traded |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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