Correlation Between GreenPower and Modine Manufacturing

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

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

Diversification Opportunities for GreenPower and Modine Manufacturing

-0.84

Correlation Coefficient

GreenPower  Modine Manufacturing

Pay attention - limited upside

The 3 months correlation between GreenPower and Modine is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding GreenPower Motor and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and GreenPower 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 GreenPower Motor 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 GreenPower i.e., GreenPower and Modine Manufacturing go up and down completely randomly.

Pair Corralation between GreenPower and Modine Manufacturing

Allowing for the 90-day total investment horizon GreenPower Motor is expected to under-perform the Modine Manufacturing. In addition to that, GreenPower is 1.24 times more volatile than Modine Manufacturing. It trades about -0.06 of its total potential returns per unit of risk. Modine Manufacturing is currently generating about 0.07 per unit of volatility. If you would invest  9,391  in Modine Manufacturing on January 30, 2024 and sell it today you would earn a total of  283.00  from holding Modine Manufacturing or generate 3.01% return on investment over 90 days.

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

GreenPower Motor  vs.  Modine Manufacturing

GreenPower Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Modine Manufacturing

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GreenPower and Modine Manufacturing

The main advantage of trading using opposite GreenPower and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenPower 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 GreenPower Motor 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.