Correlation Between AAON and Builders FirstSource

Can any of the company-specific risk be diversified away by investing in both AAON and Builders FirstSource 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 Builders FirstSource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AAON Inc and Builders FirstSource, you can compare the effects of market volatilities on AAON and Builders FirstSource 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 Builders FirstSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAON and Builders FirstSource.

Diversification Opportunities for AAON and Builders FirstSource

-0.43

Correlation Coefficient

AAON  Builders FirstSource

Very good diversification

The 3 months correlation between AAON and Builders is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Builders FirstSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Builders FirstSource 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 Builders FirstSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Builders FirstSource has no effect on the direction of AAON i.e., AAON and Builders FirstSource go up and down completely randomly.

Pair Corralation between AAON and Builders FirstSource

Given the investment horizon of 90 days AAON Inc is expected to under-perform the Builders FirstSource. In addition to that, AAON is 1.01 times more volatile than Builders FirstSource. It trades about -0.07 of its total potential returns per unit of risk. Builders FirstSource is currently generating about 0.08 per unit of volatility. If you would invest  11,193  in Builders FirstSource on May 1, 2025 and sell it today you would earn a total of  1,418  from holding Builders FirstSource or generate 12.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AAON Inc  vs.  Builders FirstSource

AAON Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAON Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Builders FirstSource

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Builders FirstSource are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Builders FirstSource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAON and Builders FirstSource

The main advantage of trading using opposite AAON and Builders FirstSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAON position performs unexpectedly, Builders FirstSource 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 Builders FirstSource will offset losses from the drop in Builders FirstSource's long position.

The idea behind AAON Inc and Builders FirstSource pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.