Correlation Between NIBE Industrier and AAON

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

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

Diversification Opportunities for NIBE Industrier and AAON

-0.6

Correlation Coefficient

NIBE Industrier  AAON

Excellent diversification

The 3 months correlation between NIBE and AAON is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and NIBE Industrier 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 NIBE Industrier AB 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 NIBE Industrier i.e., NIBE Industrier and AAON go up and down completely randomly.

Pair Corralation between NIBE Industrier and AAON

Assuming the 90 days horizon NIBE Industrier AB is expected to under-perform the AAON. In addition to that, NIBE Industrier is 1.27 times more volatile than AAON Inc. It trades about -0.09 of its total potential returns per unit of risk. AAON Inc is currently generating about 0.09 per unit of volatility. If you would invest  10,696  in AAON Inc on September 26, 2024 and sell it today you would earn a total of  1,648  from holding AAON Inc or generate 15.41% return on investment over 90 days.

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

NIBE Industrier AB  vs.  AAON Inc

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AAON Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 6 (%) 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 NIBE Industrier and AAON

The main advantage of trading using opposite NIBE Industrier and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIBE Industrier 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 NIBE Industrier AB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.