Correlation Between ECD Automotive and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both ECD Automotive 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 ECD Automotive and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and Modine Manufacturing, you can compare the effects of market volatilities on ECD Automotive 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 ECD Automotive with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and Modine Manufacturing.
Diversification Opportunities for ECD Automotive and Modine Manufacturing
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ECD and Modine is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and Modine Manufacturing go up and down completely randomly.
Pair Corralation between ECD Automotive and Modine Manufacturing
Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the Modine Manufacturing. In addition to that, ECD Automotive is 1.63 times more volatile than Modine Manufacturing. It trades about -0.05 of its total potential returns per unit of risk. Modine Manufacturing is currently generating about 0.13 per unit of volatility. If you would invest 2,068 in Modine Manufacturing on August 27, 2024 and sell it today you would earn a total of 12,254 from holding Modine Manufacturing or generate 592.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
ECD Automotive Design vs. Modine Manufacturing
Performance |
| Timeline |
| ECD Automotive Design |
| Modine Manufacturing |
ECD Automotive and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECD Automotive and Modine Manufacturing
The main advantage of trading using opposite ECD Automotive and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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.| ECD Automotive vs. MYR Group | ECD Automotive vs. EMCOR Group | ECD Automotive vs. Primoris Services | ECD Automotive vs. Emerson Electric |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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