Correlation Between AAON and Daikin IndustriesLtd

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Can any of the company-specific risk be diversified away by investing in both AAON and Daikin IndustriesLtd 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 Daikin IndustriesLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAON Inc and Daikin IndustriesLtd, you can compare the effects of market volatilities on AAON and Daikin IndustriesLtd 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 Daikin IndustriesLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAON and Daikin IndustriesLtd.

Diversification Opportunities for AAON and Daikin IndustriesLtd

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between AAON and Daikin is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding AAON Inc and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd 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 Daikin IndustriesLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daikin IndustriesLtd has no effect on the direction of AAON i.e., AAON and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between AAON and Daikin IndustriesLtd

Given the investment horizon of 90 days AAON Inc is expected to generate 0.97 times more return on investment than Daikin IndustriesLtd. However, AAON Inc is 1.03 times less risky than Daikin IndustriesLtd. It trades about 0.29 of its potential returns per unit of risk. Daikin IndustriesLtd is currently generating about 0.09 per unit of risk. If you would invest  6,429  in AAON Inc on September 1, 2022 and sell it today you would earn a total of  1,497  from holding AAON Inc or generate 23.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AAON Inc  vs.  Daikin IndustriesLtd

 Performance (%) 
       Timeline  
AAON Inc 
AAON Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, AAON disclosed solid returns over the last few months and may actually be approaching a breakup point.

AAON Price Channel

Daikin IndustriesLtd 
Daikin Performance
0 of 100
Over the last 90 days Daikin IndustriesLtd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Daikin IndustriesLtd is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Daikin Price Channel

AAON and Daikin IndustriesLtd Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AAON and Daikin IndustriesLtd

The main advantage of trading using opposite AAON and Daikin IndustriesLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAON position performs unexpectedly, Daikin IndustriesLtd 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 Daikin IndustriesLtd will offset losses from the drop in Daikin IndustriesLtd's long position.
AAON vs. Walt Disney
The idea behind AAON Inc and Daikin IndustriesLtd 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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