Correlation Between Modine Manufacturing and Teradyne
Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and Teradyne 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 Teradyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and Teradyne, you can compare the effects of market volatilities on Modine Manufacturing and Teradyne 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 Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and Teradyne.
Diversification Opportunities for Modine Manufacturing and Teradyne
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Modine and Teradyne is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Teradyne go up and down completely randomly.
Pair Corralation between Modine Manufacturing and Teradyne
Considering the 90-day investment horizon Modine Manufacturing is expected to under-perform the Teradyne. In addition to that, Modine Manufacturing is 1.51 times more volatile than Teradyne. It trades about -0.08 of its total potential returns per unit of risk. Teradyne is currently generating about 0.53 per unit of volatility. If you would invest 10,269 in Teradyne on September 20, 2024 and sell it today you would earn a total of 2,532 from holding Teradyne or generate 24.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Modine Manufacturing vs. Teradyne
Performance |
| Timeline |
| Modine Manufacturing |
| Teradyne |
Modine Manufacturing and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Modine Manufacturing and Teradyne
The main advantage of trading using opposite Modine Manufacturing and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, Teradyne 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 Teradyne will offset losses from the drop in Teradyne's long position.| Modine Manufacturing vs. Ford Motor | Modine Manufacturing vs. General Motors | Modine Manufacturing vs. Goodyear Tire Rubber | Modine Manufacturing vs. Li Auto |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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