Correlation Between AIM ETF and Innovator Equity

Can any of the company-specific risk be diversified away by investing in both AIM ETF and Innovator Equity 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 Innovator Equity 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 Innovator Equity Power, you can compare the effects of market volatilities on AIM ETF and Innovator Equity 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 Innovator Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIM ETF and Innovator Equity.

Diversification Opportunities for AIM ETF and Innovator Equity

0.87

Correlation Coefficient

AIM ETF  Innovator Equity

Very poor diversification

The 3 months correlation between AIM and Innovator is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AIM ETF Products and Innovator Equity Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Power 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Power has no effect on the direction of AIM ETF i.e., AIM ETF and Innovator Equity go up and down completely randomly.

Pair Corralation between AIM ETF and Innovator Equity

Given the investment horizon of 90 days AIM ETF is expected to generate 1.38 times less return on investment than Innovator Equity. But when comparing it to its historical volatility, AIM ETF Products is 1.97 times less risky than Innovator Equity. It trades about 0.3 of its potential returns per unit of risk. Innovator Equity Power is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,701  in Innovator Equity Power on September 4, 2024 and sell it today you would earn a total of  178.00  from holding Innovator Equity Power or generate 4.81% return on investment over 90 days.

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

AIM ETF Products  vs.  Innovator Equity Power

AIM ETF Products

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental drivers, AIM ETF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Innovator Equity Power

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Power are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AIM ETF and Innovator Equity

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

The idea behind AIM ETF Products and Innovator Equity Power 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.