Correlation Between Armstrong World and AAON
Can any of the company-specific risk be diversified away by investing in both Armstrong World and AAON 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 Armstrong World and AAON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armstrong World Industries and AAON Inc, you can compare the effects of market volatilities on Armstrong World and AAON 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 Armstrong World with a short position of AAON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and AAON.
Diversification Opportunities for Armstrong World and AAON
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Armstrong and AAON is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Armstrong World 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 Armstrong World Industries are associated (or correlated) with AAON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAON Inc has no effect on the direction of Armstrong World i.e., Armstrong World and AAON go up and down completely randomly.
Pair Corralation between Armstrong World and AAON
Considering the 90-day investment horizon Armstrong World is expected to generate 1.51 times less return on investment than AAON. But when comparing it to its historical volatility, Armstrong World Industries is 1.67 times less risky than AAON. It trades about 0.12 of its potential returns per unit of risk. AAON Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,956 in AAON Inc on October 20, 2024 and sell it today you would earn a total of 6,062 from holding AAON Inc or generate 87.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Armstrong World Industries vs. AAON Inc
Performance |
| Timeline |
| Armstrong World Indu |
| AAON Inc |
Armstrong World and AAON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Armstrong World and AAON
The main advantage of trading using opposite Armstrong World and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong World position performs unexpectedly, AAON 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 AAON will offset losses from the drop in AAON's long position.| Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | Armstrong World vs. Janus International Group |
| AAON vs. Quanex Building Products | AAON vs. Gibraltar Industries | AAON vs. Armstrong World Industries | AAON 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |