Correlation Between AAON and GMS
Can any of the company-specific risk be diversified away by investing in both AAON and GMS 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 GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAON Inc and GMS Inc, you can compare the effects of market volatilities on AAON and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAON and GMS.
Diversification Opportunities for AAON and GMS
Very poor diversification
The 3 months correlation between AAON and GMS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of AAON i.e., AAON and GMS go up and down completely randomly.
Pair Corralation between AAON and GMS
Given the investment horizon of 90 days AAON Inc is expected to generate 1.32 times more return on investment than GMS. However, AAON is 1.32 times more volatile than GMS Inc. It trades about 0.14 of its potential returns per unit of risk. GMS Inc is currently generating about 0.1 per unit of risk. If you would invest 6,241 in AAON Inc on August 26, 2024 and sell it today you would earn a total of 7,501 from holding AAON Inc or generate 120.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAON Inc vs. GMS Inc
Performance |
| Timeline |
| AAON Inc |
| GMS Inc |
AAON and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAON and GMS
The main advantage of trading using opposite AAON and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAON position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| AAON vs. Quanex Building Products | AAON vs. Gibraltar Industries | AAON vs. Armstrong World Industries | AAON vs. Beacon Roofing Supply |
| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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