Correlation Between AIM ETF and First Trust
Can any of the company-specific risk be diversified away by investing in both AIM ETF and First Trust 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 AIM ETF and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIM ETF Products and First Trust Dorsey, you can compare the effects of market volatilities on AIM ETF and First Trust 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 AIM ETF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIM ETF and First Trust.
Diversification Opportunities for AIM ETF and First Trust
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AIM and First is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding AIM ETF Products and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and AIM ETF 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 AIM ETF Products are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of AIM ETF i.e., AIM ETF and First Trust go up and down completely randomly.
Pair Corralation between AIM ETF and First Trust
Given the investment horizon of 90 days AIM ETF Products is expected to generate 0.28 times more return on investment than First Trust. However, AIM ETF Products is 3.57 times less risky than First Trust. It trades about 0.24 of its potential returns per unit of risk. First Trust Dorsey is currently generating about -0.19 per unit of risk. If you would invest 2,649 in AIM ETF Products on August 28, 2024 and sell it today you would earn a total of 30.00 from holding AIM ETF Products or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIM ETF Products vs. First Trust Dorsey
Performance |
| Timeline |
| AIM ETF Products |
| First Trust Dorsey |
AIM ETF and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIM ETF and First Trust
The main advantage of trading using opposite AIM ETF and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIM ETF position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind AIM ETF Products and First Trust Dorsey 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.| First Trust vs. First Trust Dorsey | First Trust vs. First Trust Emerging | First Trust vs. First Trust Dorsey | First Trust vs. First Trust Developed |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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