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
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Generac is 0.87. 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 4.76 times less return on investment than Generac Holdings. But when comparing it to its historical volatility, Franklin Electric Co is 1.27 times less risky than Generac Holdings. It trades about 0.01 of its potential returns per unit of risk. Generac Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 14,703 in Generac Holdings on November 2, 2024 and sell it today you would earn a total of 522.00 from holding Generac Holdings or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| 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. Graco Inc | Franklin Electric vs. Ametek Inc | Franklin Electric vs. Flowserve | Franklin Electric vs. Donaldson |
| Generac Holdings vs. Emerson Electric | Generac Holdings vs. Eaton PLC | Generac Holdings vs. Parker Hannifin | Generac Holdings vs. Illinois Tool Works |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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