Correlation Between Modine Manufacturing and Mesa Air

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

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

Diversification Opportunities for Modine Manufacturing and Mesa Air

0.11

Correlation Coefficient

Modine Manufacturing  Mesa Air

Average diversification

The 3 months correlation between Modine and Mesa is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Mesa Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Air Group 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 Mesa Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Air Group has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Mesa Air go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Mesa Air

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 0.55 times more return on investment than Mesa Air. However, Modine Manufacturing is 1.8 times less risky than Mesa Air. It trades about 0.1 of its potential returns per unit of risk. Mesa Air Group is currently generating about 0.05 per unit of risk. If you would invest  5,260  in Modine Manufacturing on September 28, 2024 and sell it today you would earn a total of  6,790  from holding Modine Manufacturing or generate 129.09% 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.  Mesa Air Group

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Mesa Air Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modine Manufacturing and Mesa Air

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

The idea behind Modine Manufacturing and Mesa Air Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.