Correlation Between Innovator and AIM ETF

Can any of the company-specific risk be diversified away by investing in both Innovator 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 Innovator and AIM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innovator SP 500 and AIM ETF Products, you can compare the effects of market volatilities on Innovator 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 Innovator with a short position of AIM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and AIM ETF.

Diversification Opportunities for Innovator and AIM ETF

0.99

Correlation Coefficient

Innovator  AIM ETF

No risk reduction

The 3 months correlation between Innovator and AIM is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 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 Innovator 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 Innovator SP 500 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 Innovator i.e., Innovator and AIM ETF go up and down completely randomly.

Pair Corralation between Innovator and AIM ETF

Given the investment horizon of 90 days Innovator SP 500 is expected to generate 0.46 times more return on investment than AIM ETF. However, Innovator SP 500 is 2.18 times less risky than AIM ETF. It trades about 0.66 of its potential returns per unit of risk. AIM ETF Products is currently generating about 0.15 per unit of risk. If you would invest  3,568  in Innovator SP 500 on September 19, 2024 and sell it today you would earn a total of  34.00  from holding Innovator SP 500 or generate 0.95% return on investment over 90 days.

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

Innovator SP 500  vs.  AIM ETF Products

Innovator SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Innovator is not utilizing all of its potentials. The latest stock price disturbance, 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 rather sound basic indicators, AIM ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovator and AIM ETF

The main advantage of trading using opposite Innovator and AIM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator 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 Innovator SP 500 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.