Correlation Between Franklin Electric and China Yuchai
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and China Yuchai 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 China Yuchai 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 China Yuchai International, you can compare the effects of market volatilities on Franklin Electric and China Yuchai 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 China Yuchai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and China Yuchai.
Diversification Opportunities for Franklin Electric and China Yuchai
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and China is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and China Yuchai International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Yuchai Interna 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 China Yuchai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Yuchai Interna has no effect on the direction of Franklin Electric i.e., Franklin Electric and China Yuchai go up and down completely randomly.
Pair Corralation between Franklin Electric and China Yuchai
Given the investment horizon of 90 days Franklin Electric Co is expected to generate 0.72 times more return on investment than China Yuchai. However, Franklin Electric Co is 1.39 times less risky than China Yuchai. It trades about 0.05 of its potential returns per unit of risk. China Yuchai International is currently generating about 0.03 per unit of risk. If you would invest 7,998 in Franklin Electric Co on August 24, 2024 and sell it today you would earn a total of 2,666 from holding Franklin Electric Co or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Electric Co vs. China Yuchai International
Performance |
| Timeline |
| Franklin Electric |
| China Yuchai Interna |
Franklin Electric and China Yuchai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and China Yuchai
The main advantage of trading using opposite Franklin Electric and China Yuchai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, China Yuchai 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 China Yuchai will offset losses from the drop in China Yuchai's long position.| Franklin Electric vs. Illinois Tool Works | Franklin Electric vs. Small Cap Core | Franklin Electric vs. Freedom Holding Corp | Franklin Electric vs. Gfl Environmental Holdings |
| China Yuchai vs. China Automotive Systems | China Yuchai vs. China Natural Resources | China Yuchai vs. Sonida Senior Living | China Yuchai vs. UTStarcom Holdings Corp |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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