Correlation Between Modine Manufacturing and Icon Energy

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

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

Diversification Opportunities for Modine Manufacturing and Icon Energy

0.4

Correlation Coefficient

Modine Manufacturing  Icon Energy

Very weak diversification

The 3 months correlation between Modine and Icon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp 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 Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Icon Energy go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Icon Energy

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.03 times more return on investment than Icon Energy. However, Modine Manufacturing is 1.03 times more volatile than Icon Energy Corp. It trades about -0.1 of its potential returns per unit of risk. Icon Energy Corp is currently generating about -0.16 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	Weak
Accuracy	95.24%
Values	Daily Returns

Modine Manufacturing  vs.  Icon Energy Corp

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.

Icon Energy Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Icon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modine Manufacturing and Icon Energy

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

The idea behind Modine Manufacturing and Icon Energy Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.