Correlation Between NYSE Composite and Aim Treasurers

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Aim Treasurers 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 NYSE Composite and Aim Treasurers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Aim Treasurers Series, you can compare the effects of market volatilities on NYSE Composite and Aim Treasurers 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 NYSE Composite with a short position of Aim Treasurers. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Aim Treasurers.

Diversification Opportunities for NYSE Composite and Aim Treasurers

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between NYSE and Aim is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Aim Treasurers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim Treasurers Series and NYSE Composite 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 NYSE Composite are associated (or correlated) with Aim Treasurers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim Treasurers Series has no effect on the direction of NYSE Composite i.e., NYSE Composite and Aim Treasurers go up and down completely randomly.
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Pair Corralation between NYSE Composite and Aim Treasurers

Assuming the 90 days trading horizon NYSE Composite is expected to generate 5.18 times more return on investment than Aim Treasurers. However, NYSE Composite is 5.18 times more volatile than Aim Treasurers Series. It trades about 0.08 of its potential returns per unit of risk. Aim Treasurers Series is currently generating about 0.13 per unit of risk. If you would invest  1,548,776  in NYSE Composite on March 27, 2024 and sell it today you would earn a total of  263,893  from holding NYSE Composite or generate 17.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  Aim Treasurers Series

 Performance 
       Timeline  

NYSE Composite and Aim Treasurers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and Aim Treasurers

The main advantage of trading using opposite NYSE Composite and Aim Treasurers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Aim Treasurers 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 Treasurers will offset losses from the drop in Aim Treasurers' long position.
The idea behind NYSE Composite and Aim Treasurers Series 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.

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