Correlation Between Geberit AG and AAON

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

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

Diversification Opportunities for Geberit AG and AAON

-0.58

Correlation Coefficient

Geberit AG  AAON

Excellent diversification

The 3 months correlation between Geberit and AAON is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG ADR and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Geberit AG 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 Geberit AG ADR 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 Geberit AG i.e., Geberit AG and AAON go up and down completely randomly.

Pair Corralation between Geberit AG and AAON

Assuming the 90 days horizon Geberit AG ADR is expected to generate 0.51 times more return on investment than AAON. However, Geberit AG ADR is 1.97 times less risky than AAON. It trades about -0.07 of its potential returns per unit of risk. AAON Inc is currently generating about -0.08 per unit of risk. If you would invest  5,861  in Geberit AG ADR on September 21, 2024 and sell it today you would lose (128.00) from holding Geberit AG ADR or give up 2.18% of portfolio value over 90 days.

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

Geberit AG ADR  vs.  AAON Inc

Geberit AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geberit AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AAON Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 7 (%) 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 Geberit AG and AAON

The main advantage of trading using opposite Geberit AG and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geberit AG 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 Geberit AG ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.