Correlation Between Albemarle and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both Albemarle and Modine Manufacturing 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 Albemarle and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albemarle and Modine Manufacturing, you can compare the effects of market volatilities on Albemarle and Modine Manufacturing 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 Albemarle with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and Modine Manufacturing.
Diversification Opportunities for Albemarle and Modine Manufacturing
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Albemarle and Modine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Albemarle 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 Albemarle are associated (or correlated) with Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of Albemarle i.e., Albemarle and Modine Manufacturing go up and down completely randomly.
Pair Corralation between Albemarle and Modine Manufacturing
Assuming the 90 days trading horizon Albemarle is expected to generate 0.32 times more return on investment than Modine Manufacturing. However, Albemarle is 3.14 times less risky than Modine Manufacturing. It trades about -0.05 of its potential returns per unit of risk. Modine Manufacturing is currently generating about -0.1 per unit of risk. If you would invest 4,156 in Albemarle on November 4, 2024 and sell it today you would lose (104.00) from holding Albemarle or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Albemarle vs. Modine Manufacturing
Performance |
| Timeline |
| Albemarle |
| Modine Manufacturing |
Albemarle and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Albemarle and Modine Manufacturing
The main advantage of trading using opposite Albemarle and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle position performs unexpectedly, Modine Manufacturing 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 Modine Manufacturing will offset losses from the drop in Modine Manufacturing's long position.| Albemarle vs. Chemours Co | Albemarle vs. Dupont De Nemours | Albemarle vs. FutureFuel Corp | Albemarle vs. Ecovyst |
| Modine Manufacturing vs. Cooper Stnd | Modine Manufacturing vs. Motorcar Parts of | Modine Manufacturing vs. American Axle Manufacturing | Modine Manufacturing vs. Stoneridge |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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