Correlation Between General Electric and AAON

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

Diversification Opportunities for General Electric and AAON

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between General and AAON is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and General Electric 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 General Electric 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 General Electric i.e., General Electric and AAON go up and down completely randomly.

Pair Corralation between General Electric and AAON

Allowing for the 90-day total investment horizon General Electric is expected to generate 3.72 times less return on investment than AAON. But when comparing it to its historical volatility, General Electric is 1.41 times less risky than AAON. It trades about 0.05 of its potential returns per unit of risk. AAON Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,452  in AAON Inc on September 9, 2022 and sell it today you would earn a total of  365.00  from holding AAON Inc or generate 4.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  AAON Inc

 Performance (%) 
       Timeline  
General Electric 
General Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

General Price Channel

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 uncertain basic indicators, AAON disclosed solid returns over the last few months and may actually be approaching a breakup point.

AAON Price Channel

General Electric and AAON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and AAON

The main advantage of trading using opposite General Electric and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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.
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The idea behind General Electric 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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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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