Correlation Between Modine Manufacturing and American Axle
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and American Axle 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 Modine Manufacturing and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and American Axle Manufacturing, you can compare the effects of market volatilities on Modine Manufacturing and American Axle 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 Modine Manufacturing with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and American Axle.
Diversification Opportunities for Modine Manufacturing and American Axle
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Modine and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa and Modine Manufacturing 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 Modine Manufacturing are associated (or correlated) with American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and American Axle go up and down completely randomly.
Pair Corralation between Modine Manufacturing and American Axle
Considering the 90-day investment horizon Modine Manufacturing is expected to generate 2.31 times less return on investment than American Axle. In addition to that, Modine Manufacturing is 1.43 times more volatile than American Axle Manufacturing. It trades about 0.04 of its total potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.14 per unit of volatility. If you would invest 611.00 in American Axle Manufacturing on August 30, 2024 and sell it today you would earn a total of 59.00 from holding American Axle Manufacturing or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Modine Manufacturing vs. American Axle Manufacturing
Performance |
| Timeline |
| Modine Manufacturing |
| American Axle Manufa |
Modine Manufacturing and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and American Axle
The main advantage of trading using opposite Modine Manufacturing and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle's long position.| Modine Manufacturing vs. Ford Motor | Modine Manufacturing vs. General Motors | Modine Manufacturing vs. Goodyear Tire Rubber | Modine Manufacturing vs. Li Auto |
| American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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