Correlation Between Modine Manufacturing and AK Steel

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

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

Diversification Opportunities for Modine Manufacturing and AK Steel

0.0

Correlation Coefficient

Modine Manufacturing  AK Steel

Pay attention - limited upside

The 3 months correlation between Modine and AKS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Modine Manufacturing and AK Steel Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AK Steel Holding 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 AK Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AK Steel Holding has no effect on the direction of Modine Manufacturing i.e., Modine Manufacturing and AK Steel go up and down completely randomly.

Pair Corralation between Modine Manufacturing and AK Steel

If you would invest  8,920  in Modine Manufacturing on February 5, 2024 and sell it today you would earn a total of  491.00  from holding Modine Manufacturing or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Modine Manufacturing  vs.  AK Steel Holding

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 fragile basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

AK Steel Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AK Steel Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, AK Steel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Modine Manufacturing and AK Steel

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

The idea behind Modine Manufacturing and AK Steel Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.