Correlation Between EZGO Technologies and Modine Manufacturing

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

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

Diversification Opportunities for EZGO Technologies and Modine Manufacturing

0.65

Correlation Coefficient

EZGO Technologies  Modine Manufacturing

Poor diversification

The 3 months correlation between EZGO and Modine is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EZGO Technologies and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and EZGO Technologies 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 EZGO Technologies 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 EZGO Technologies i.e., EZGO Technologies and Modine Manufacturing go up and down completely randomly.

Pair Corralation between EZGO Technologies and Modine Manufacturing

Given the investment horizon of 90 days EZGO Technologies is expected to under-perform the Modine Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, EZGO Technologies is 1.01 times less risky than Modine Manufacturing. The stock trades about -0.22 of its potential returns per unit of risk. The Modine Manufacturing is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  11,865  in Modine Manufacturing on December 27, 2024 and sell it today you would lose (2,542) from holding Modine Manufacturing or give up 21.42% of portfolio value over 90 days.

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

EZGO Technologies  vs.  Modine Manufacturing

EZGO Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days EZGO Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Modine Manufacturing

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with EZGO Technologies and Modine Manufacturing

The main advantage of trading using opposite EZGO Technologies and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EZGO Technologies 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 EZGO Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.