Correlation Between AIM ETF and Small Cap

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

Diversification Opportunities for AIM ETF and Small Cap

0.02

Correlation Coefficient

AIM ETF  Small Cap

Significant diversification

The 3 months correlation between AIM and Small is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AIM ETF Products and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of AIM ETF i.e., AIM ETF and Small Cap go up and down completely randomly.

Pair Corralation between AIM ETF and Small Cap

Given the investment horizon of 90 days AIM ETF Products is expected to generate 0.19 times more return on investment than Small Cap. However, AIM ETF Products is 5.35 times less risky than Small Cap. It trades about 0.17 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.01 per unit of risk. If you would invest  2,844  in AIM ETF Products on October 5, 2024 and sell it today you would earn a total of  707.00  from holding AIM ETF Products or generate 24.86% return on investment over 90 days.

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

AIM ETF Products  vs.  Small Cap Core

AIM ETF Products

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 7 (%) 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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with AIM ETF and Small Cap

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

The idea behind AIM ETF Products and Small Cap Core 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.