Correlation Between New Providence and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both New Providence and Modine Manufacturing 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 New Providence and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Providence Acquisition and Modine Manufacturing, you can compare the effects of market volatilities on New Providence and Modine Manufacturing 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 New Providence with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Providence and Modine Manufacturing.
Diversification Opportunities for New Providence and Modine Manufacturing
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Modine is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding New Providence Acquisition and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and New Providence 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 New Providence Acquisition are associated (or correlated) with Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of New Providence i.e., New Providence and Modine Manufacturing go up and down completely randomly.
Pair Corralation between New Providence and Modine Manufacturing
Assuming the 90 days horizon New Providence Acquisition is expected to under-perform the Modine Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, New Providence Acquisition is 7.92 times less risky than Modine Manufacturing. The stock trades about -0.33 of its potential returns per unit of risk. The Modine Manufacturing is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 11,777 in Modine Manufacturing on September 1, 2024 and sell it today you would earn a total of 1,802 from holding Modine Manufacturing or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 42.86% |
| Values | Daily Returns |
New Providence Acquisition vs. Modine Manufacturing
Performance |
| Timeline |
| New Providence Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Modine Manufacturing |
New Providence and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Providence and Modine Manufacturing
The main advantage of trading using opposite New Providence and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Providence position performs unexpectedly, Modine Manufacturing 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 Modine Manufacturing will offset losses from the drop in Modine Manufacturing's long position.| New Providence vs. Sligro Food Group | New Providence vs. Tesla Inc | New Providence vs. Modine Manufacturing | New Providence vs. FitLife Brands, Common |
| Modine Manufacturing vs. Cooper Stnd | Modine Manufacturing vs. Motorcar Parts of | Modine Manufacturing vs. American Axle Manufacturing | Modine Manufacturing vs. Stoneridge |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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