Correlation Between AAON and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both AAON and Trane Technologies 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 Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAON Inc and Trane Technologies plc, you can compare the effects of market volatilities on AAON and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAON and Trane Technologies.
Diversification Opportunities for AAON and Trane Technologies
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AAON and Trane is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of AAON i.e., AAON and Trane Technologies go up and down completely randomly.
Pair Corralation between AAON and Trane Technologies
Given the investment horizon of 90 days AAON Inc is expected to generate 1.5 times more return on investment than Trane Technologies. However, AAON is 1.5 times more volatile than Trane Technologies plc. It trades about 0.1 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.12 per unit of risk. If you would invest 5,261 in AAON Inc on August 27, 2024 and sell it today you would earn a total of 8,481 from holding AAON Inc or generate 161.21% 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. Trane Technologies plc
Performance |
| Timeline |
| AAON Inc |
| Trane Technologies plc |
AAON and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAON and Trane Technologies
The main advantage of trading using opposite AAON and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAON position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.| AAON vs. Quanex Building Products | AAON vs. Gibraltar Industries | AAON vs. Armstrong World Industries | AAON vs. Beacon Roofing Supply |
| Trane Technologies vs. Trex Company | Trane Technologies vs. Gibraltar Industries | Trane Technologies vs. Travis Perkins PLC | Trane Technologies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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