Correlation Between Modine Manufacturing and Playtech Plc

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

By analyzing existing cross correlation between Modine Manufacturing and Playtech plc, you can compare the effects of market volatilities on Modine Manufacturing and Playtech Plc 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and Playtech Plc.

Diversification Opportunities for Modine Manufacturing and Playtech Plc

0.06

Correlation Coefficient

Modine Manufacturing  Playtech Plc

Significant diversification

The 3 months correlation between Modine and Playtech is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Playtech Plc go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Playtech Plc

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 5.84 times less return on investment than Playtech Plc. In addition to that, Modine Manufacturing is 1.22 times more volatile than Playtech plc. It trades about 0.02 of its total potential returns per unit of risk. Playtech plc is currently generating about 0.12 per unit of volatility. If you would invest  782.00  in Playtech plc on September 19, 2024 and sell it today you would earn a total of  161.00  from holding Playtech plc or generate 20.59% return on investment over 90 days.

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

Modine Manufacturing  vs.  Playtech plc

Modine Manufacturing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Modine Manufacturing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Playtech plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Playtech Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modine Manufacturing and Playtech Plc

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

The idea behind Modine Manufacturing and Playtech plc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.