Correlation Between Modine Manufacturing and Small Cap
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and Small Cap Premium, you can compare the effects of market volatilities on Modine Manufacturing and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and Small Cap.
Diversification Opportunities for Modine Manufacturing and Small Cap
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Modine and Small is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Small Cap go up and down completely randomly.
Pair Corralation between Modine Manufacturing and Small Cap
Considering the 90-day investment horizon Modine Manufacturing is expected to under-perform the Small Cap. In addition to that, Modine Manufacturing is 4.34 times more volatile than Small Cap Premium. It trades about -0.19 of its total potential returns per unit of risk. Small Cap Premium is currently generating about -0.05 per unit of volatility. If you would invest 2,460 in Small Cap Premium on October 14, 2024 and sell it today you would lose (15.00) from holding Small Cap Premium or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Modine Manufacturing vs. Small Cap Premium
Performance |
| Timeline |
| Modine Manufacturing |
| Small Cap Premium |
Modine Manufacturing and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and Small Cap
The main advantage of trading using opposite Modine Manufacturing and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Modine Manufacturing vs. Cooper Stnd | Modine Manufacturing vs. Motorcar Parts of | Modine Manufacturing vs. American Axle Manufacturing | Modine Manufacturing vs. Stoneridge |
| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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