Correlation Between Modine Manufacturing and Stepstone
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and Stepstone 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 Stepstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and Stepstone Group, you can compare the effects of market volatilities on Modine Manufacturing and Stepstone 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 Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and Stepstone.
Diversification Opportunities for Modine Manufacturing and Stepstone
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Modine and Stepstone is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Stepstone go up and down completely randomly.
Pair Corralation between Modine Manufacturing and Stepstone
Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.8 times more return on investment than Stepstone. However, Modine Manufacturing is 1.8 times more volatile than Stepstone Group. It trades about 0.15 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.15 per unit of risk. If you would invest 2,037 in Modine Manufacturing on August 31, 2024 and sell it today you would earn a total of 11,300 from holding Modine Manufacturing or generate 554.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Modine Manufacturing vs. Stepstone Group
Performance |
| Timeline |
| Modine Manufacturing |
| Stepstone Group |
Modine Manufacturing and Stepstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and Stepstone
The main advantage of trading using opposite Modine Manufacturing and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, Stepstone 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 Stepstone will offset losses from the drop in Stepstone's long position.| Modine Manufacturing vs. Cooper Stnd | Modine Manufacturing vs. Motorcar Parts of | Modine Manufacturing vs. American Axle Manufacturing | Modine Manufacturing vs. Stoneridge |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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