Correlation Between Franklin Electric and Kadant
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and Kadant 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 Kadant 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 Kadant Inc, you can compare the effects of market volatilities on Franklin Electric and Kadant 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 Kadant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and Kadant.
Diversification Opportunities for Franklin Electric and Kadant
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Kadant is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc 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 Kadant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadant Inc has no effect on the direction of Franklin Electric i.e., Franklin Electric and Kadant go up and down completely randomly.
Pair Corralation between Franklin Electric and Kadant
Given the investment horizon of 90 days Franklin Electric is expected to generate 4.13 times less return on investment than Kadant. But when comparing it to its historical volatility, Franklin Electric Co is 1.23 times less risky than Kadant. It trades about 0.05 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 26,946 in Kadant Inc on August 24, 2024 and sell it today you would earn a total of 13,896 from holding Kadant Inc or generate 51.57% 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. Kadant Inc
Performance |
| Timeline |
| Franklin Electric |
| Kadant Inc |
Franklin Electric and Kadant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and Kadant
The main advantage of trading using opposite Franklin Electric and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, Kadant 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 Kadant will offset losses from the drop in Kadant'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 |
| Kadant vs. Small Cap Core | Kadant vs. Freedom Holding Corp | Kadant vs. Gfl Environmental Holdings | Kadant vs. Growth Fund Of |
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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