Correlation Between ProPhase Labs and Modine Manufacturing

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Can any of the company-specific risk be diversified away by investing in both ProPhase Labs 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 ProPhase Labs and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProPhase Labs and Modine Manufacturing, you can compare the effects of market volatilities on ProPhase Labs 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 ProPhase Labs with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProPhase Labs and Modine Manufacturing.

Diversification Opportunities for ProPhase Labs and Modine Manufacturing

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ProPhase and Modine is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ProPhase Labs and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and ProPhase Labs 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 ProPhase Labs 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 ProPhase Labs i.e., ProPhase Labs and Modine Manufacturing go up and down completely randomly.

Pair Corralation between ProPhase Labs and Modine Manufacturing

Given the investment horizon of 90 days ProPhase Labs is expected to generate 1.94 times less return on investment than Modine Manufacturing. But when comparing it to its historical volatility, ProPhase Labs is 1.03 times less risky than Modine Manufacturing. It trades about 0.11 of its potential returns per unit of risk. Modine Manufacturing is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,553  in Modine Manufacturing on December 29, 2023 and sell it today you would earn a total of  4,972  from holding Modine Manufacturing or generate 109.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ProPhase Labs  vs.  Modine Manufacturing

 Performance 
       Timeline  
ProPhase Labs 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ProPhase Labs are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ProPhase Labs demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Modine Manufacturing 

Risk-Adjusted Performance

22 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

ProPhase Labs and Modine Manufacturing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProPhase Labs and Modine Manufacturing

The main advantage of trading using opposite ProPhase Labs and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProPhase Labs 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 ProPhase Labs 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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