Correlation Between Modine Manufacturing and Titan Machinery

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Can any of the company-specific risk be diversified away by investing in both Modine Manufacturing and Titan Machinery 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 Titan Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Modine Manufacturing and Titan Machinery, you can compare the effects of market volatilities on Modine Manufacturing and Titan Machinery 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 Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modine Manufacturing and Titan Machinery.

Diversification Opportunities for Modine Manufacturing and Titan Machinery

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Modine and Titan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Titan Machinery go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Titan Machinery

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.14 times more return on investment than Titan Machinery. However, Modine Manufacturing is 1.14 times more volatile than Titan Machinery. It trades about -0.12 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.16 per unit of risk. If you would invest  13,035  in Modine Manufacturing on October 11, 2024 and sell it today you would lose (925.00) from holding Modine Manufacturing or give up 7.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Modine Manufacturing  vs.  Titan Machinery

 Performance 
       Timeline  
Modine Manufacturing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Titan Machinery 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Modine Manufacturing and Titan Machinery Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Modine Manufacturing and Titan Machinery

The main advantage of trading using opposite Modine Manufacturing and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modine Manufacturing position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.
The idea behind Modine Manufacturing and Titan Machinery 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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