Correlation Between AAON and Toto

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

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

Diversification Opportunities for AAON and Toto

-0.76

Correlation Coefficient

AAON  Toto

Pay attention - limited upside

The 3 months correlation between AAON and Toto is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Toto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toto 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 Toto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toto has no effect on the direction of AAON i.e., AAON and Toto go up and down completely randomly.

Pair Corralation between AAON and Toto

Given the investment horizon of 90 days AAON Inc is expected to generate 1.23 times more return on investment than Toto. However, AAON is 1.23 times more volatile than Toto. It trades about 0.23 of its potential returns per unit of risk. Toto is currently generating about -0.13 per unit of risk. If you would invest  8,879  in AAON Inc on September 4, 2024 and sell it today you would earn a total of  4,350  from holding AAON Inc or generate 48.99% return on investment over 90 days.

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

AAON Inc  vs.  Toto

AAON Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 17 (%) 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.

Toto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toto 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 fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AAON and Toto

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

The idea behind AAON Inc and Toto 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.