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 Exchange Traded 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

0.99

Correlation Coefficient

First Trust  AIM ETF

No risk reduction

The 3 months correlation between First and AIM is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded 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 Exchange Traded 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 Exchange Traded is expected to generate 1.54 times more return on investment than AIM ETF. However, First Trust is 1.54 times more volatile than AIM ETF Products. It trades about 0.14 of its potential returns per unit of risk. AIM ETF Products is currently generating about 0.16 per unit of risk. If you would invest  3,268  in First Trust Exchange Traded on September 22, 2024 and sell it today you would earn a total of  1,304  from holding First Trust Exchange Traded or generate 39.9% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  AIM ETF Products

First Trust Exchange

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AIM ETF Products

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AIM ETF is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

The idea behind First Trust Exchange Traded and AIM ETF Products 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.