Correlation Between Small Cap and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and Modine Manufacturing, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Modine Manufacturing.
Diversification Opportunities for Small Cap and Modine Manufacturing
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Modine is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Small Cap 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 Small Cap Premium 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 Small Cap i.e., Small Cap and Modine Manufacturing go up and down completely randomly.
Pair Corralation between Small Cap and Modine Manufacturing
Considering the 90-day investment horizon Small Cap Premium is expected to generate 0.23 times more return on investment than Modine Manufacturing. However, Small Cap Premium is 4.34 times less risky than Modine Manufacturing. It trades about -0.05 of its potential returns per unit of risk. Modine Manufacturing is currently generating about -0.19 per unit of risk. 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 |
Small Cap Premium vs. Modine Manufacturing
Performance |
| Timeline |
| Small Cap Premium |
| Modine Manufacturing |
Small Cap and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Modine Manufacturing
The main advantage of trading using opposite Small Cap and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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