Correlation Between Modine Manufacturing and Brunswick

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

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

Diversification Opportunities for Modine Manufacturing and Brunswick

0.7

Correlation Coefficient

Modine Manufacturing  Brunswick

Poor diversification

The 3 months correlation between Modine and Brunswick is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick 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 Brunswick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Brunswick go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Brunswick

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.88 times more return on investment than Brunswick. However, Modine Manufacturing is 1.88 times more volatile than Brunswick. It trades about 0.13 of its potential returns per unit of risk. Brunswick is currently generating about 0.03 per unit of risk. If you would invest  10,630  in Modine Manufacturing on September 4, 2024 and sell it today you would earn a total of  3,144  from holding Modine Manufacturing or generate 29.58% return on investment over 90 days.

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

Modine Manufacturing  vs.  Brunswick

Modine Manufacturing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brunswick

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Modine Manufacturing and Brunswick

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

The idea behind Modine Manufacturing and Brunswick 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.