Correlation Between Modine Manufacturing and WELLS

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

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

Diversification Opportunities for Modine Manufacturing and WELLS

0.28

Correlation Coefficient

Modine Manufacturing  WELLS

Modest diversification

The 3 months correlation between Modine and WELLS is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and WELLS FARGO BK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO BK 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 WELLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLS FARGO BK has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and WELLS go up and down completely randomly.

Pair Corralation between Modine Manufacturing and WELLS

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 2.06 times more return on investment than WELLS. However, Modine Manufacturing is 2.06 times more volatile than WELLS FARGO BK. It trades about 0.09 of its potential returns per unit of risk. WELLS FARGO BK is currently generating about -0.08 per unit of risk. If you would invest  11,107  in Modine Manufacturing on September 13, 2024 and sell it today you would earn a total of  1,928  from holding Modine Manufacturing or generate 17.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	52.38%
Values	Daily Returns

Modine Manufacturing  vs.  WELLS FARGO BK

Modine Manufacturing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

WELLS FARGO BK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WELLS FARGO BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WELLS FARGO BK investors.

Pair Trading with Modine Manufacturing and WELLS

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

The idea behind Modine Manufacturing and WELLS FARGO BK 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.