Correlation Between Modine Manufacturing and Nio

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

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

Diversification Opportunities for Modine Manufacturing and Nio

-0.56

Correlation Coefficient

Modine Manufacturing  Nio

Excellent diversification

The 3 months correlation between Modine and Nio is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Nio go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Nio

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 21.66 times less return on investment than Nio. But when comparing it to its historical volatility, Modine Manufacturing is 1.84 times less risky than Nio. It trades about 0.02 of its potential returns per unit of risk. Nio Class A is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Nio Class A on February 3, 2024 and sell it today you would earn a total of  110.00  from holding Nio Class A or generate 24.5% return on investment over 90 days.

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

Modine Manufacturing  vs.  Nio Class A

Modine Manufacturing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nio Class A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Nio may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Modine Manufacturing and Nio

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

The idea behind Modine Manufacturing and Nio Class A 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.