Correlation Between Trex and AAON
Can any of the company-specific risk be diversified away by investing in both Trex 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 Trex and AAON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trex Company and AAON Inc, you can compare the effects of market volatilities on Trex 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 Trex with a short position of AAON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trex and AAON.
Diversification Opportunities for Trex and AAON
Poor diversification
The 3 months correlation between Trex and AAON is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Trex Company and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Trex 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 Trex Company 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 Trex i.e., Trex and AAON go up and down completely randomly.
Pair Corralation between Trex and AAON
Given the investment horizon of 90 days Trex is expected to generate 2.2 times less return on investment than AAON. But when comparing it to its historical volatility, Trex Company is 2.05 times less risky than AAON. It trades about 0.25 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trex Company vs. AAON Inc
Performance |
| Timeline |
| Trex Company |
| AAON Inc |
Trex and AAON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trex and AAON
The main advantage of trading using opposite Trex and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trex 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.| Trex vs. Quanex Building Products | Trex vs. Armstrong World Industries | Trex vs. Gibraltar Industries | Trex vs. Apogee Enterprises |
| 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 CEOs Directory module to screen CEOs from public companies around the world.
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