Correlation Between Franklin Electric and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and Emerson Electric 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 Emerson Electric 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 Emerson Electric, you can compare the effects of market volatilities on Franklin Electric and Emerson Electric 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 Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and Emerson Electric.
Diversification Opportunities for Franklin Electric and Emerson Electric
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Emerson is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Franklin Electric i.e., Franklin Electric and Emerson Electric go up and down completely randomly.
Pair Corralation between Franklin Electric and Emerson Electric
Given the investment horizon of 90 days Franklin Electric is expected to generate 3.29 times less return on investment than Emerson Electric. In addition to that, Franklin Electric is 1.16 times more volatile than Emerson Electric. It trades about 0.09 of its total potential returns per unit of risk. Emerson Electric is currently generating about 0.35 per unit of volatility. If you would invest 10,807 in Emerson Electric on August 24, 2024 and sell it today you would earn a total of 2,020 from holding Emerson Electric or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Electric Co vs. Emerson Electric
Performance |
| Timeline |
| Franklin Electric |
| Emerson Electric |
Franklin Electric and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and Emerson Electric
The main advantage of trading using opposite Franklin Electric and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, Emerson Electric 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 Emerson Electric will offset losses from the drop in Emerson Electric'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 |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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