Correlation Between Modine Manufacturing and TFI International

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

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

Diversification Opportunities for Modine Manufacturing and TFI International

0.48

Correlation Coefficient

Modine Manufacturing  TFI International

Very weak diversification

The 3 months correlation between Modine and TFI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and TFI International go up and down completely randomly.

Pair Corralation between Modine Manufacturing and TFI International

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 2.36 times more return on investment than TFI International. However, Modine Manufacturing is 2.36 times more volatile than TFI International. It trades about 0.0 of its potential returns per unit of risk. TFI International is currently generating about -0.18 per unit of risk. If you would invest  12,501  in Modine Manufacturing on October 7, 2024 and sell it today you would lose (257.00) from holding Modine Manufacturing or give up 2.06% of portfolio value over 90 days.

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

Modine Manufacturing  vs.  TFI International

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.

TFI International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Modine Manufacturing and TFI International

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

The idea behind Modine Manufacturing and TFI International 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.