Correlation Between Modine Manufacturing and Academy Sports

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

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

Diversification Opportunities for Modine Manufacturing and Academy Sports

-0.41

Correlation Coefficient

Modine Manufacturing  Academy Sports

Very good diversification

The 3 months correlation between Modine and Academy is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Academy Sports Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdoors 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 Academy Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academy Sports Outdoors has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Academy Sports go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Academy Sports

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.93 times less return on investment than Academy Sports. In addition to that, Modine Manufacturing is 1.53 times more volatile than Academy Sports Outdoors. It trades about 0.02 of its total potential returns per unit of risk. Academy Sports Outdoors is currently generating about 0.06 per unit of volatility. If you would invest  5,224  in Academy Sports Outdoors on October 26, 2024 and sell it today you would earn a total of  407.00  from holding Academy Sports Outdoors or generate 7.79% return on investment over 90 days.

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

Modine Manufacturing  vs.  Academy Sports Outdoors

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.

Academy Sports Outdoors

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Academy Sports may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Modine Manufacturing and Academy Sports

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

The idea behind Modine Manufacturing and Academy Sports Outdoors 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.