Correlation Between Modine Manufacturing and Air Lease

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

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

Diversification Opportunities for Modine Manufacturing and Air Lease

0.3

Correlation Coefficient

Modine Manufacturing  Air Lease

Weak diversification

The 3 months correlation between Modine and Air is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Modine Manufacturing 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 Modine Manufacturing are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Air Lease go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Air Lease

Considering the 90-day investment horizon Modine Manufacturing is expected to under-perform the Air Lease. In addition to that, Modine Manufacturing is 2.28 times more volatile than Air Lease. It trades about -0.23 of its total potential returns per unit of risk. Air Lease is currently generating about -0.23 per unit of volatility. If you would invest  5,193  in Air Lease on September 24, 2024 and sell it today you would lose (336.00) from holding Air Lease or give up 6.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Modine Manufacturing  vs.  Air Lease

Modine Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modine Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Air Lease

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Modine Manufacturing and Air Lease

The main advantage of trading using opposite Modine Manufacturing and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.

The idea behind Modine Manufacturing and Air Lease 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.