Correlation Between Franklin Electric and TPI Composites
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and TPI Composites 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 TPI Composites 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 TPI Composites, you can compare the effects of market volatilities on Franklin Electric and TPI Composites 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 TPI Composites. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and TPI Composites.
Diversification Opportunities for Franklin Electric and TPI Composites
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and TPI is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and TPI Composites in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPI Composites 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 TPI Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPI Composites has no effect on the direction of Franklin Electric i.e., Franklin Electric and TPI Composites go up and down completely randomly.
Pair Corralation between Franklin Electric and TPI Composites
Given the investment horizon of 90 days Franklin Electric Co is expected to generate 0.34 times more return on investment than TPI Composites. However, Franklin Electric Co is 2.95 times less risky than TPI Composites. It trades about 0.22 of its potential returns per unit of risk. TPI Composites is currently generating about -0.31 per unit of risk. If you would invest 9,628 in Franklin Electric Co on August 31, 2024 and sell it today you would earn a total of 1,089 from holding Franklin Electric Co or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Electric Co vs. TPI Composites
Performance |
| Timeline |
| Franklin Electric |
| TPI Composites |
Franklin Electric and TPI Composites Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and TPI Composites
The main advantage of trading using opposite Franklin Electric and TPI Composites positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, TPI Composites 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 TPI Composites will offset losses from the drop in TPI Composites' long position.| Franklin Electric vs. Graco Inc | Franklin Electric vs. Ametek Inc | Franklin Electric vs. Flowserve | Franklin Electric vs. Donaldson |
| TPI Composites vs. Flowserve | TPI Composites vs. Franklin Electric Co | TPI Composites vs. Watts Water Technologies | TPI Composites vs. Gorman Rupp |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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