Correlation Between Stoneridge and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both Stoneridge 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 Stoneridge and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stoneridge and Modine Manufacturing, you can compare the effects of market volatilities on Stoneridge 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 Stoneridge with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stoneridge and Modine Manufacturing.
Diversification Opportunities for Stoneridge and Modine Manufacturing
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Stoneridge and Modine is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Stoneridge and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Stoneridge 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 Stoneridge 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 Stoneridge i.e., Stoneridge and Modine Manufacturing go up and down completely randomly.
Pair Corralation between Stoneridge and Modine Manufacturing
Considering the 90-day investment horizon Stoneridge is expected to under-perform the Modine Manufacturing. In addition to that, Stoneridge is 1.45 times more volatile than Modine Manufacturing. It trades about -0.24 of its total potential returns per unit of risk. Modine Manufacturing is currently generating about 0.12 per unit of volatility. If you would invest 13,106 in Modine Manufacturing on August 27, 2024 and sell it today you would earn a total of 1,216 from holding Modine Manufacturing or generate 9.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stoneridge vs. Modine Manufacturing
Performance |
| Timeline |
| Stoneridge |
| Modine Manufacturing |
Stoneridge and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stoneridge and Modine Manufacturing
The main advantage of trading using opposite Stoneridge and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stoneridge 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.The idea behind Stoneridge and Modine Manufacturing pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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