Correlation Between Modine Manufacturing and Standard

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

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

Diversification Opportunities for Modine Manufacturing and Standard

0.62

Correlation Coefficient

Modine Manufacturing  Standard

Poor diversification

The 3 months correlation between Modine and Standard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products 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 Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and Standard go up and down completely randomly.

Pair Corralation between Modine Manufacturing and Standard

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 1.59 times more return on investment than Standard. However, Modine Manufacturing is 1.59 times more volatile than Standard Motor Products. It trades about 0.15 of its potential returns per unit of risk. Standard Motor Products is currently generating about 0.22 per unit of risk. If you would invest  10,245  in Modine Manufacturing on May 15, 2025 and sell it today you would earn a total of  3,927  from holding Modine Manufacturing or generate 38.33% return on investment over 90 days.

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

Modine Manufacturing  vs.  Standard Motor Products

Modine Manufacturing

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 12 (%) 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.

Standard Motor Products

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Motor Products are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Standard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modine Manufacturing and Standard

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

The idea behind Modine Manufacturing and Standard Motor Products 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.