Correlation Between Carrier Global and AAON

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

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

Diversification Opportunities for Carrier Global and AAON

0.13

Correlation Coefficient

Carrier Global  AAON

Average diversification

The 3 months correlation between Carrier and AAON is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Carrier Global Corp and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and Carrier Global 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 Carrier Global Corp 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 Carrier Global i.e., Carrier Global and AAON go up and down completely randomly.

Pair Corralation between Carrier Global and AAON

Given the investment horizon of 90 days Carrier Global is expected to generate 4.05 times less return on investment than AAON. But when comparing it to its historical volatility, Carrier Global Corp is 1.69 times less risky than AAON. It trades about 0.1 of its potential returns per unit of risk. AAON Inc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,916  in AAON Inc on September 3, 2024 and sell it today you would earn a total of  4,718  from holding AAON Inc or generate 52.92% return on investment over 90 days.

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

Carrier Global Corp  vs.  AAON Inc

Carrier Global Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carrier Global Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Carrier Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AAON Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 19 (%) 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 Carrier Global and AAON

The main advantage of trading using opposite Carrier Global and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carrier Global 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 Carrier Global Corp 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.