Correlation Between Aspen Aerogels and AAON

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

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

Diversification Opportunities for Aspen Aerogels and AAON

0.9

Correlation Coefficient

Aspen Aerogels  AAON

Almost no diversification

The 3 months correlation between Aspen and AAON is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Aerogels and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Aspen Aerogels 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 Aspen Aerogels 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 Aspen Aerogels i.e., Aspen Aerogels and AAON go up and down completely randomly.

Pair Corralation between Aspen Aerogels and AAON

Given the investment horizon of 90 days Aspen Aerogels is expected to under-perform the AAON. In addition to that, Aspen Aerogels is 1.01 times more volatile than AAON Inc. It trades about -0.17 of its total potential returns per unit of risk. AAON Inc is currently generating about -0.13 per unit of volatility. If you would invest  11,951  in AAON Inc on December 28, 2024 and sell it today you would lose (3,927) from holding AAON Inc or give up 32.86% of portfolio value over 90 days.

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

Aspen Aerogels  vs.  AAON Inc

Aspen Aerogels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aspen Aerogels 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.

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.

Pair Trading with Aspen Aerogels and AAON

The main advantage of trading using opposite Aspen Aerogels and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Aerogels 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 Aspen Aerogels 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.