Correlation Between Modine Manufacturing and Valmont Industries

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

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

Diversification Opportunities for Modine Manufacturing and Valmont Industries

0.3

Correlation Coefficient

Modine Manufacturing  Valmont Industries

Weak diversification

The 3 months correlation between Modine and Valmont is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Valmont Industries go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Valmont Industries

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.74 times more return on investment than Valmont Industries. However, Modine Manufacturing is 1.74 times more volatile than Valmont Industries. It trades about 0.11 of its potential returns per unit of risk. Valmont Industries is currently generating about 0.01 per unit of risk. If you would invest  2,299  in Modine Manufacturing on October 6, 2024 and sell it today you would earn a total of  9,945  from holding Modine Manufacturing or generate 432.58% return on investment over 90 days.

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

Modine Manufacturing  vs.  Valmont Industries

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.

Valmont Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Valmont Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Modine Manufacturing and Valmont Industries

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

The idea behind Modine Manufacturing and Valmont Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.