Correlation Between Modine Manufacturing and Worksport

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

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

Diversification Opportunities for Modine Manufacturing and Worksport

-0.38

Correlation Coefficient

Modine Manufacturing  Worksport

Very good diversification

The 3 months correlation between Modine and Worksport is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Worksport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worksport 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 Worksport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worksport has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Worksport go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Worksport

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 0.55 times more return on investment than Worksport. However, Modine Manufacturing is 1.83 times less risky than Worksport. It trades about 0.11 of its potential returns per unit of risk. Worksport is currently generating about 0.02 per unit of risk. If you would invest  2,036  in Modine Manufacturing on September 28, 2024 and sell it today you would earn a total of  9,829  from holding Modine Manufacturing or generate 482.76% return on investment over 90 days.

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

Modine Manufacturing  vs.  Worksport

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 uncertain 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.

Worksport

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Worksport are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Worksport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modine Manufacturing and Worksport

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

The idea behind Modine Manufacturing and Worksport 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.