Correlation Between Modine Manufacturing and Magna International
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and Magna International, you can compare the effects of market volatilities on Modine Manufacturing and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and Magna International.
Diversification Opportunities for Modine Manufacturing and Magna International
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Modine and Magna is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Magna International go up and down completely randomly.
Pair Corralation between Modine Manufacturing and Magna International
Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.96 times more return on investment than Magna International. However, Modine Manufacturing is 1.96 times more volatile than Magna International. It trades about 0.13 of its potential returns per unit of risk. Magna International is currently generating about -0.03 per unit of risk. If you would invest 5,179 in Modine Manufacturing on August 27, 2024 and sell it today you would earn a total of 9,143 from holding Modine Manufacturing or generate 176.54% 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. Magna International
Performance |
| Timeline |
| Modine Manufacturing |
| Magna International |
Modine Manufacturing and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and Magna International
The main advantage of trading using opposite Modine Manufacturing and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.The idea behind Modine Manufacturing and Magna International 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.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |