Correlation Between CAPITAL and Modine Manufacturing

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

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

Diversification Opportunities for CAPITAL and Modine Manufacturing

-0.35

Correlation Coefficient

CAPITAL  Modine Manufacturing

Very good diversification

The 3 months correlation between CAPITAL and Modine is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CAPITAL ONE FINANCIAL and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and CAPITAL 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 CAPITAL ONE FINANCIAL 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 CAPITAL i.e., CAPITAL and Modine Manufacturing go up and down completely randomly.

Pair Corralation between CAPITAL and Modine Manufacturing

Assuming the 90 days trading horizon CAPITAL ONE FINANCIAL is expected to generate 0.05 times more return on investment than Modine Manufacturing. However, CAPITAL ONE FINANCIAL is 19.78 times less risky than Modine Manufacturing. It trades about 0.08 of its potential returns per unit of risk. Modine Manufacturing is currently generating about -0.07 per unit of risk. If you would invest  9,705  in CAPITAL ONE FINANCIAL on December 24, 2024 and sell it today you would earn a total of  130.00  from holding CAPITAL ONE FINANCIAL or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

CAPITAL ONE FINANCIAL  vs.  Modine Manufacturing

CAPITAL ONE FINANCIAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAPITAL ONE FINANCIAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 CAPITAL and Modine Manufacturing

The main advantage of trading using opposite CAPITAL and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAPITAL 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 CAPITAL ONE FINANCIAL 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .