Correlation Between Modine Manufacturing and Estrella Immunopharma

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

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

Diversification Opportunities for Modine Manufacturing and Estrella Immunopharma

0.06

Correlation Coefficient

Modine Manufacturing  Estrella Immunopharma

Significant diversification

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

Pair Corralation between Modine Manufacturing and Estrella Immunopharma

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 0.3 times more return on investment than Estrella Immunopharma. However, Modine Manufacturing is 3.29 times less risky than Estrella Immunopharma. It trades about 0.11 of its potential returns per unit of risk. Estrella Immunopharma is currently generating about 0.01 per unit of risk. If you would invest  2,178  in Modine Manufacturing on October 11, 2024 and sell it today you would earn a total of  9,932  from holding Modine Manufacturing or generate 456.01% 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.  Estrella Immunopharma

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.

Estrella Immunopharma

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Estrella Immunopharma are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Estrella Immunopharma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modine Manufacturing and Estrella Immunopharma

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

The idea behind Modine Manufacturing and Estrella Immunopharma 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.