Correlation Between Gibraltar Industries and AAON

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

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

Diversification Opportunities for Gibraltar Industries and AAON

0.05

Correlation Coefficient

Gibraltar Industries  AAON

Significant diversification

The 3 months correlation between Gibraltar and AAON is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gibraltar Industries and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Gibraltar Industries 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 Gibraltar Industries 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 Gibraltar Industries i.e., Gibraltar Industries and AAON go up and down completely randomly.

Pair Corralation between Gibraltar Industries and AAON

Given the investment horizon of 90 days Gibraltar Industries is expected to generate 2.62 times less return on investment than AAON. In addition to that, Gibraltar Industries is 1.01 times more volatile than AAON Inc. It trades about 0.22 of its total potential returns per unit of risk. AAON Inc is currently generating about 0.59 per unit of volatility. If you would invest  8,859  in AAON Inc on July 10, 2024 and sell it today you would earn a total of  2,056  from holding AAON Inc or generate 23.21% return on investment over 90 days.

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

Gibraltar Industries  vs.  AAON Inc

Gibraltar Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gibraltar Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Gibraltar Industries is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AAON Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, AAON displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gibraltar Industries and AAON

The main advantage of trading using opposite Gibraltar Industries and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gibraltar Industries 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.

The idea behind Gibraltar Industries and AAON Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..