Correlation Between AIM ETF and Franklin FTSE

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

Diversification Opportunities for AIM ETF and Franklin FTSE

-0.25

Correlation Coefficient

AIM ETF  Franklin FTSE

Very good diversification

The 3 months correlation between AIM and Franklin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding AIM ETF Products and Franklin FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Japan 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Japan has no effect on the direction of AIM ETF i.e., AIM ETF and Franklin FTSE go up and down completely randomly.

Pair Corralation between AIM ETF and Franklin FTSE

Given the investment horizon of 90 days AIM ETF Products is expected to under-perform the Franklin FTSE. But the etf apears to be less risky and, when comparing its historical volatility, AIM ETF Products is 1.83 times less risky than Franklin FTSE. The etf trades about -0.02 of its potential returns per unit of risk. The Franklin FTSE Japan is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,860  in Franklin FTSE Japan on December 28, 2024 and sell it today you would earn a total of  160.00  from holding Franklin FTSE Japan or generate 5.59% return on investment over 90 days.

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

AIM ETF Products  vs.  Franklin FTSE Japan

AIM ETF Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIM ETF Products has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Franklin FTSE Japan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Japan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, Franklin FTSE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AIM ETF and Franklin FTSE

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

The idea behind AIM ETF Products and Franklin FTSE Japan 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.