Correlation Between AAON and Interface
Can any of the company-specific risk be diversified away by investing in both AAON and Interface 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 Interface into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAON Inc and Interface, you can compare the effects of market volatilities on AAON and Interface 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 Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAON and Interface.
Diversification Opportunities for AAON and Interface
Poor diversification
The 3 months correlation between AAON and Interface is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of AAON i.e., AAON and Interface go up and down completely randomly.
Pair Corralation between AAON and Interface
Given the investment horizon of 90 days AAON Inc is expected to generate 0.88 times more return on investment than Interface. However, AAON Inc is 1.13 times less risky than Interface. It trades about 0.38 of its potential returns per unit of risk. Interface is currently generating about -0.11 per unit of risk. If you would invest 12,268 in AAON Inc on October 26, 2024 and sell it today you would earn a total of 1,427 from holding AAON Inc or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAON Inc vs. Interface
Performance |
| Timeline |
| AAON Inc |
| Interface |
AAON and Interface Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAON and Interface
The main advantage of trading using opposite AAON and Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAON position performs unexpectedly, Interface 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 Interface will offset losses from the drop in Interface's long position.| AAON vs. Quanex Building Products | AAON vs. Gibraltar Industries | AAON vs. Armstrong World Industries | AAON vs. Beacon Roofing Supply |
| Interface vs. Atos SE | Interface vs. Deveron Corp | Interface vs. Appen Limited | Interface vs. Atos Origin SA |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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