Correlation Between Modine Manufacturing and Allison Transmission

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

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

Diversification Opportunities for Modine Manufacturing and Allison Transmission

-0.56

Correlation Coefficient

Modine Manufacturing  Allison Transmission

Excellent diversification

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

Pair Corralation between Modine Manufacturing and Allison Transmission

Considering the 90-day investment horizon Modine Manufacturing is expected to generate 2.2 times more return on investment than Allison Transmission. However, Modine Manufacturing is 2.2 times more volatile than Allison Transmission Holdings. It trades about 0.08 of its potential returns per unit of risk. Allison Transmission Holdings is currently generating about -0.1 per unit of risk. If you would invest  14,212  in Modine Manufacturing on August 12, 2025 and sell it today you would earn a total of  1,762  from holding Modine Manufacturing or generate 12.4% 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.  Allison Transmission Holdings

Modine Manufacturing

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Modine Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Modine Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Allison Transmission

Risk-Adjusted Performance

Weakest

Over the last 90 days Allison Transmission Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Modine Manufacturing and Allison Transmission

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

The idea behind Modine Manufacturing and Allison Transmission Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..