Correlation Between Masco and AAON
Can any of the company-specific risk be diversified away by investing in both Masco 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 Masco and AAON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masco and AAON Inc, you can compare the effects of market volatilities on Masco 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 Masco with a short position of AAON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco and AAON.
Diversification Opportunities for Masco and AAON
Significant diversification
The 3 months correlation between Masco and AAON is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Masco and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Masco 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 Masco 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 Masco i.e., Masco and AAON go up and down completely randomly.
Pair Corralation between Masco and AAON
Considering the 90-day investment horizon Masco is expected to generate 2.32 times less return on investment than AAON. But when comparing it to its historical volatility, Masco is 1.5 times less risky than AAON. It trades about 0.06 of its potential returns per unit of risk. AAON Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Masco vs. AAON Inc
Performance |
| Timeline |
| Masco |
| AAON Inc |
Masco and AAON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Masco and AAON
The main advantage of trading using opposite Masco and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco 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.| Masco vs. Trane Technologies plc | Masco vs. Quanex Building Products | Masco vs. Jeld Wen Holding | Masco vs. Azek Company |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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