Correlation Between Franklin Electric and Generac Holdings
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and Generac Holdings 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 Generac Holdings 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 Generac Holdings, you can compare the effects of market volatilities on Franklin Electric and Generac Holdings 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 Generac Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and Generac Holdings.
Diversification Opportunities for Franklin Electric and Generac Holdings
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Generac is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings 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 Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Franklin Electric i.e., Franklin Electric and Generac Holdings go up and down completely randomly.
Pair Corralation between Franklin Electric and Generac Holdings
Given the investment horizon of 90 days Franklin Electric is expected to generate 1.92 times less return on investment than Generac Holdings. In addition to that, Franklin Electric is 1.36 times more volatile than Generac Holdings. It trades about 0.09 of its total potential returns per unit of risk. Generac Holdings is currently generating about 0.24 per unit of volatility. If you would invest 16,618 in Generac Holdings on August 24, 2024 and sell it today you would earn a total of 1,734 from holding Generac Holdings or generate 10.43% 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. Generac Holdings
Performance |
| Timeline |
| Franklin Electric |
| Generac Holdings |
Franklin Electric and Generac Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and Generac Holdings
The main advantage of trading using opposite Franklin Electric and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, Generac Holdings 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 Generac Holdings will offset losses from the drop in Generac Holdings' 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 |
| Generac Holdings vs. Illinois Tool Works | Generac Holdings vs. Small Cap Core | Generac Holdings vs. Freedom Holding Corp | Generac Holdings vs. Gfl Environmental Holdings |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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