Correlation Between Ralph Lauren and Modine Manufacturing

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

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

Diversification Opportunities for Ralph Lauren and Modine Manufacturing

-0.2

Correlation Coefficient

Ralph Lauren  Modine Manufacturing

Good diversification

The 3 months correlation between Ralph and Modine is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and Ralph Lauren 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 Ralph Lauren Corp are associated (or correlated) with Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Modine Manufacturing go up and down completely randomly.

Pair Corralation between Ralph Lauren and Modine Manufacturing

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.48 times more return on investment than Modine Manufacturing. However, Ralph Lauren Corp is 2.08 times less risky than Modine Manufacturing. It trades about 0.02 of its potential returns per unit of risk. Modine Manufacturing is currently generating about -0.05 per unit of risk. If you would invest  22,955  in Ralph Lauren Corp on December 27, 2024 and sell it today you would earn a total of  218.00  from holding Ralph Lauren Corp or generate 0.95% return on investment over 90 days.

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

Ralph Lauren Corp  vs.  Modine Manufacturing

Ralph Lauren Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Ralph Lauren is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Modine Manufacturing

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ralph Lauren and Modine Manufacturing

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

The idea behind Ralph Lauren Corp and Modine Manufacturing 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.