Correlation Between Modine Manufacturing and Pinterest

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

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

Diversification Opportunities for Modine Manufacturing and Pinterest

0.15

Correlation Coefficient

Modine Manufacturing  Pinterest

Average diversification

The 3 months correlation between Modine and Pinterest is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Pinterest go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Pinterest

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.34 times more return on investment than Pinterest. However, Modine Manufacturing is 1.34 times more volatile than Pinterest. It trades about 0.11 of its potential returns per unit of risk. Pinterest is currently generating about 0.03 per unit of risk. If you would invest  2,366  in Modine Manufacturing on October 26, 2024 and sell it today you would earn a total of  10,858  from holding Modine Manufacturing or generate 458.92% 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.  Pinterest

Modine Manufacturing

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pinterest

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Modine Manufacturing and Pinterest

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

The idea behind Modine Manufacturing and Pinterest 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.