Correlation Between Modine Manufacturing and BRP
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and BRP 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 BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and BRP Inc, you can compare the effects of market volatilities on Modine Manufacturing and BRP 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 BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and BRP.
Diversification Opportunities for Modine Manufacturing and BRP
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Modine and BRP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and BRP go up and down completely randomly.
Pair Corralation between Modine Manufacturing and BRP
Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.38 times more return on investment than BRP. However, Modine Manufacturing is 1.38 times more volatile than BRP Inc. It trades about -0.11 of its potential returns per unit of risk. BRP Inc is currently generating about -0.41 per unit of risk. If you would invest 9,749 in Modine Manufacturing on November 28, 2024 and sell it today you would lose (1,048) from holding Modine Manufacturing or give up 10.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Modine Manufacturing vs. BRP Inc
Performance |
| Timeline |
| Modine Manufacturing |
| BRP Inc |
Modine Manufacturing and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and BRP
The main advantage of trading using opposite Modine Manufacturing and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.| 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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