Correlation Between AIM ETF and SPDR SP

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

Diversification Opportunities for AIM ETF and SPDR SP

0.88

Correlation Coefficient

AIM ETF  SPDR SP

Very poor diversification

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

Pair Corralation between AIM ETF and SPDR SP

Given the investment horizon of 90 days AIM ETF Products is expected to generate 0.49 times more return on investment than SPDR SP. However, AIM ETF Products is 2.04 times less risky than SPDR SP. It trades about -0.05 of its potential returns per unit of risk. SPDR SP MIDCAP is currently generating about -0.07 per unit of risk. If you would invest  2,690  in AIM ETF Products on December 26, 2024 and sell it today you would lose (41.00) from holding AIM ETF Products or give up 1.52% of portfolio value over 90 days.

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

AIM ETF Products  vs.  SPDR SP MIDCAP

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.

SPDR SP MIDCAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP MIDCAP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AIM ETF and SPDR SP

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

The idea behind AIM ETF Products and SPDR SP MIDCAP 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.