Correlation Between GMS and AAON
Can any of the company-specific risk be diversified away by investing in both GMS 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 GMS and AAON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and AAON Inc, you can compare the effects of market volatilities on GMS 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 GMS with a short position of AAON. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and AAON.
Diversification Opportunities for GMS and AAON
Very poor diversification
The 3 months correlation between GMS and AAON is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and GMS 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 GMS Inc 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 GMS i.e., GMS and AAON go up and down completely randomly.
Pair Corralation between GMS and AAON
Considering the 90-day investment horizon GMS is expected to generate 2.39 times less return on investment than AAON. But when comparing it to its historical volatility, GMS Inc is 2.45 times less risky than AAON. It trades about 0.27 of its potential returns per unit of risk. AAON Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,689 in AAON Inc on August 24, 2024 and sell it today you would earn a total of 2,867 from holding AAON Inc or generate 26.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. AAON Inc
Performance |
| Timeline |
| GMS Inc |
| AAON Inc |
GMS and AAON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and AAON
The main advantage of trading using opposite GMS and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |