Correlation Between Franklin Electric and American Superconductor
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and American Superconductor 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 Franklin Electric and American Superconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Electric Co and American Superconductor, you can compare the effects of market volatilities on Franklin Electric and American Superconductor 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 Franklin Electric with a short position of American Superconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and American Superconductor.
Diversification Opportunities for Franklin Electric and American Superconductor
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and American is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and Franklin Electric 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 Franklin Electric Co are associated (or correlated) with American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of Franklin Electric i.e., Franklin Electric and American Superconductor go up and down completely randomly.
Pair Corralation between Franklin Electric and American Superconductor
Given the investment horizon of 90 days Franklin Electric is expected to generate 9.61 times less return on investment than American Superconductor. But when comparing it to its historical volatility, Franklin Electric Co is 3.19 times less risky than American Superconductor. It trades about 0.05 of its potential returns per unit of risk. American Superconductor is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,360 in American Superconductor on August 30, 2024 and sell it today you would earn a total of 877.00 from holding American Superconductor or generate 37.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Franklin Electric Co vs. American Superconductor
Performance |
| Timeline |
| Franklin Electric |
| American Superconductor |
Franklin Electric and American Superconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and American Superconductor
The main advantage of trading using opposite Franklin Electric and American Superconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, American Superconductor 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 American Superconductor will offset losses from the drop in American Superconductor's long position.| Franklin Electric vs. Graco Inc | Franklin Electric vs. Ametek Inc | Franklin Electric vs. Flowserve | Franklin Electric vs. Donaldson |
| American Superconductor vs. Nel ASA | American Superconductor vs. Graham | American Superconductor vs. Watts Water Technologies | American Superconductor vs. CVD Equipment |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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