Correlation Between Volcon and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both Volcon 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 Volcon and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volcon Inc and Modine Manufacturing, you can compare the effects of market volatilities on Volcon 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 Volcon with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volcon and Modine Manufacturing.
Diversification Opportunities for Volcon and Modine Manufacturing
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volcon and Modine is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Volcon 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 Volcon Inc 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 Volcon i.e., Volcon and Modine Manufacturing go up and down completely randomly.
Pair Corralation between Volcon and Modine Manufacturing
Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Modine Manufacturing. In addition to that, Volcon is 2.54 times more volatile than Modine Manufacturing. It trades about -0.18 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 2,122 in Modine Manufacturing on August 23, 2024 and sell it today you would earn a total of 11,927 from holding Modine Manufacturing or generate 562.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volcon Inc vs. Modine Manufacturing
Performance |
| Timeline |
| Volcon Inc |
| Modine Manufacturing |
Volcon and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volcon and Modine Manufacturing
The main advantage of trading using opposite Volcon and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volcon 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 Volcon Inc 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.| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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