Correlation Between MAG Silver and AAON

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

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

Diversification Opportunities for MAG Silver and AAON

0.52

Correlation Coefficient

MAG Silver  AAON

Very weak diversification

The 3 months correlation between MAG and AAON is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MAG Silver Corp and AAON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAON Inc and MAG Silver 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 MAG Silver 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 MAG Silver i.e., MAG Silver and AAON go up and down completely randomly.

Pair Corralation between MAG Silver and AAON

Considering the 90-day investment horizon MAG Silver Corp is expected to generate 1.87 times more return on investment than AAON. However, MAG Silver is 1.87 times more volatile than AAON Inc. It trades about 0.37 of its potential returns per unit of risk. AAON Inc is currently generating about 0.09 per unit of risk. If you would invest  901.00  in MAG Silver Corp on January 26, 2024 and sell it today you would earn a total of  306.00  from holding MAG Silver Corp or generate 33.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

MAG Silver Corp  vs.  AAON Inc

MAG Silver Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Silver Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MAG Silver reported solid returns over the last few months and may actually be approaching a breakup point.

AAON Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAON Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, AAON displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAG Silver and AAON

The main advantage of trading using opposite MAG Silver and AAON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAG Silver 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 MAG Silver 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.