Correlation Between AIM ETF and FAM

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

Diversification Opportunities for AIM ETF and FAM

0.88

Correlation Coefficient

AIM ETF  FAM

Very poor diversification

The 3 months correlation between AIM and FAM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AIM ETF Products and FAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAM 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 FAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAM has no effect on the direction of AIM ETF i.e., AIM ETF and FAM go up and down completely randomly.

Pair Corralation between AIM ETF and FAM

Given the investment horizon of 90 days AIM ETF is expected to generate 5.08 times less return on investment than FAM. But when comparing it to its historical volatility, AIM ETF Products is 4.09 times less risky than FAM. It trades about 0.26 of its potential returns per unit of risk. FAM is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  641.00  in FAM on September 4, 2024 and sell it today you would earn a total of  33.00  from holding FAM or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	23.44%
Values	Daily Returns

AIM ETF Products  vs.  FAM

AIM ETF Products

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 20 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FAM

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days FAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, FAM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIM ETF and FAM

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

The idea behind AIM ETF Products and FAM 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.