Correlation Between Modine Manufacturing and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and RBC Bearings 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 RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and RBC Bearings Incorporated, you can compare the effects of market volatilities on Modine Manufacturing and RBC Bearings 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 RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and RBC Bearings.
Diversification Opportunities for Modine Manufacturing and RBC Bearings
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Modine and RBC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and RBC Bearings go up and down completely randomly.
Pair Corralation between Modine Manufacturing and RBC Bearings
Considering the 90-day investment horizon Modine Manufacturing is expected to generate 2.29 times more return on investment than RBC Bearings. However, Modine Manufacturing is 2.29 times more volatile than RBC Bearings Incorporated. It trades about 0.11 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.08 per unit of risk. If you would invest 5,184 in Modine Manufacturing on September 14, 2024 and sell it today you would earn a total of 8,029 from holding Modine Manufacturing or generate 154.88% 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. RBC Bearings Incorporated
Performance |
| Timeline |
| Modine Manufacturing |
| RBC Bearings |
Modine Manufacturing and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and RBC Bearings
The main advantage of trading using opposite Modine Manufacturing and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| Modine Manufacturing vs. Ford Motor | Modine Manufacturing vs. General Motors | Modine Manufacturing vs. Goodyear Tire Rubber | Modine Manufacturing vs. Li Auto |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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