Correlation Between AAON and Armstrong World
Can any of the company-specific risk be diversified away by investing in both AAON and Armstrong World 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 AAON and Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAON Inc and Armstrong World Industries, you can compare the effects of market volatilities on AAON and Armstrong World 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 AAON with a short position of Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAON and Armstrong World.
Diversification Opportunities for AAON and Armstrong World
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between AAON and Armstrong is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and AAON 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 AAON Inc are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of AAON i.e., AAON and Armstrong World go up and down completely randomly.
Pair Corralation between AAON and Armstrong World
Given the investment horizon of 90 days AAON Inc is expected to generate 1.79 times more return on investment than Armstrong World. However, AAON is 1.79 times more volatile than Armstrong World Industries. It trades about 0.18 of its potential returns per unit of risk. Armstrong World Industries is currently generating about 0.18 per unit of risk. If you would invest 7,752 in AAON Inc on August 24, 2024 and sell it today you would earn a total of 5,804 from holding AAON Inc or generate 74.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAON Inc vs. Armstrong World Industries
Performance |
| Timeline |
| AAON Inc |
| Armstrong World Indu |
AAON and Armstrong World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAON and Armstrong World
The main advantage of trading using opposite AAON and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAON position performs unexpectedly, Armstrong World 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 Armstrong World will offset losses from the drop in Armstrong World's long position.| AAON vs. Quanex Building Products | AAON vs. Gibraltar Industries | AAON vs. Armstrong World Industries | AAON vs. Beacon Roofing Supply |
| Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | Armstrong World vs. Janus International Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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