Correlation Between AAON and Owens Corning

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

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

Diversification Opportunities for AAON and Owens Corning

0.85

Correlation Coefficient

AAON  Owens Corning

Very poor diversification

The 3 months correlation between AAON and Owens is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of AAON i.e., AAON and Owens Corning go up and down completely randomly.

Pair Corralation between AAON and Owens Corning

Given the investment horizon of 90 days AAON Inc is expected to under-perform the Owens Corning. In addition to that, AAON is 2.3 times more volatile than Owens Corning. It trades about -0.13 of its total potential returns per unit of risk. Owens Corning is currently generating about -0.15 per unit of volatility. If you would invest  17,291  in Owens Corning on December 18, 2024 and sell it today you would lose (2,785) from holding Owens Corning or give up 16.11% of portfolio value over 90 days.

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

AAON Inc  vs.  Owens Corning

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Owens Corning

Risk-Adjusted Performance

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AAON and Owens Corning

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

The idea behind AAON Inc and Owens Corning 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.