Correlation Between Modine Manufacturing and Gentex

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

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

Diversification Opportunities for Modine Manufacturing and Gentex

0.21

Correlation Coefficient

Modine Manufacturing  Gentex

Modest diversification

The 3 months correlation between Modine and Gentex is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Gentex go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Gentex

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 2.94 times more return on investment than Gentex. However, Modine Manufacturing is 2.94 times more volatile than Gentex. It trades about -0.1 of its potential returns per unit of risk. Gentex is currently generating about -0.53 per unit of risk. If you would invest  12,957  in Modine Manufacturing on October 10, 2024 and sell it today you would lose (795.00) from holding Modine Manufacturing or give up 6.14% of portfolio value over 90 days.

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

Modine Manufacturing  vs.  Gentex

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 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.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Modine Manufacturing and Gentex

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

The idea behind Modine Manufacturing and Gentex 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..