Correlation Between Dana and Modine Manufacturing

Can any of the company-specific risk be diversified away by investing in both Dana 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 Dana and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dana Inc and Modine Manufacturing, you can compare the effects of market volatilities on Dana 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 Dana with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Modine Manufacturing.

Diversification Opportunities for Dana and Modine Manufacturing

0.2

Correlation Coefficient

Dana  Modine Manufacturing

Modest diversification

The 3 months correlation between Dana and Modine is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Dana 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 Dana 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 Dana i.e., Dana and Modine Manufacturing go up and down completely randomly.

Pair Corralation between Dana and Modine Manufacturing

Considering the 90-day investment horizon Dana Inc is expected to generate 1.07 times more return on investment than Modine Manufacturing. However, Dana is 1.07 times more volatile than Modine Manufacturing. It trades about 0.55 of its potential returns per unit of risk. Modine Manufacturing is currently generating about 0.3 per unit of risk. If you would invest  763.00  in Dana Inc on September 5, 2024 and sell it today you would earn a total of  447.00  from holding Dana Inc or generate 58.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Dana Inc  vs.  Modine Manufacturing

Dana Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Modine Manufacturing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dana and Modine Manufacturing

The main advantage of trading using opposite Dana and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana 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 Dana 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..