Correlation Between Franklin Electric and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on Franklin Electric and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and Pentair PLC.
Diversification Opportunities for Franklin Electric and Pentair PLC
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Pentair is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Franklin Electric i.e., Franklin Electric and Pentair PLC go up and down completely randomly.
Pair Corralation between Franklin Electric and Pentair PLC
Given the investment horizon of 90 days Franklin Electric is expected to generate 4.43 times less return on investment than Pentair PLC. But when comparing it to its historical volatility, Franklin Electric Co is 1.02 times less risky than Pentair PLC. It trades about 0.03 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7,716 in Pentair PLC on August 27, 2024 and sell it today you would earn a total of 2,977 from holding Pentair PLC or generate 38.58% 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. Pentair PLC
Performance |
| Timeline |
| Franklin Electric |
| Pentair PLC |
Franklin Electric and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and Pentair PLC
The main advantage of trading using opposite Franklin Electric and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| Franklin Electric vs. Aquagold International | Franklin Electric vs. Morningstar Unconstrained Allocation | Franklin Electric vs. High Yield Municipal Fund | Franklin Electric vs. Thrivent High Yield |
| Pentair PLC vs. Aquagold International | Pentair PLC vs. Morningstar Unconstrained Allocation | Pentair PLC vs. High Yield Municipal Fund | Pentair PLC vs. Thrivent High Yield |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |