Correlation Between AAON and Quanex Building

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

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

Diversification Opportunities for AAON and Quanex Building

0.89

Correlation Coefficient

AAON  Quanex Building

Very poor diversification

The 3 months correlation between AAON and Quanex is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of AAON i.e., AAON and Quanex Building go up and down completely randomly.

Pair Corralation between AAON and Quanex Building

Given the investment horizon of 90 days AAON Inc is expected to generate 0.99 times more return on investment than Quanex Building. However, AAON Inc is 1.01 times less risky than Quanex Building. It trades about 0.03 of its potential returns per unit of risk. Quanex Building Products is currently generating about 0.01 per unit of risk. If you would invest  6,574  in AAON Inc on January 10, 2025 and sell it today you would earn a total of  1,648  from holding AAON Inc or generate 25.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AAON Inc  vs.  Quanex Building Products

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Quanex Building Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AAON and Quanex Building

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

The idea behind AAON Inc and Quanex Building Products 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.

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.