Correlation Between Modine Manufacturing and Mullen Automotive

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

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

Diversification Opportunities for Modine Manufacturing and Mullen Automotive

0.73

Correlation Coefficient

Modine Manufacturing  Mullen Automotive

Poor diversification

The 3 months correlation between Modine and Mullen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Mullen Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Automotive 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 Mullen Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mullen Automotive has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Mullen Automotive go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Mullen Automotive

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 0.34 times more return on investment than Mullen Automotive. However, Modine Manufacturing is 2.98 times less risky than Mullen Automotive. It trades about -0.09 of its potential returns per unit of risk. Mullen Automotive is currently generating about -0.55 per unit of risk. If you would invest  11,764  in Modine Manufacturing on December 29, 2024 and sell it today you would lose (3,768) from holding Modine Manufacturing or give up 32.03% of portfolio value over 90 days.

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

Modine Manufacturing  vs.  Mullen Automotive

Modine Manufacturing

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Mullen Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mullen Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Modine Manufacturing and Mullen Automotive

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

The idea behind Modine Manufacturing and Mullen Automotive 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.