Correlation Between Franklin Electric and Watts Water
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and Watts Water 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 Watts Water 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 Watts Water Technologies, you can compare the effects of market volatilities on Franklin Electric and Watts Water 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 Watts Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and Watts Water.
Diversification Opportunities for Franklin Electric and Watts Water
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Watts is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Watts Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watts Water Technologies 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 Watts Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watts Water Technologies has no effect on the direction of Franklin Electric i.e., Franklin Electric and Watts Water go up and down completely randomly.
Pair Corralation between Franklin Electric and Watts Water
Given the investment horizon of 90 days Franklin Electric is expected to generate 1.09 times less return on investment than Watts Water. But when comparing it to its historical volatility, Franklin Electric Co is 1.02 times less risky than Watts Water. It trades about 0.04 of its potential returns per unit of risk. Watts Water Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 15,772 in Watts Water Technologies on August 23, 2024 and sell it today you would earn a total of 5,308 from holding Watts Water Technologies or generate 33.65% 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. Watts Water Technologies
Performance |
| Timeline |
| Franklin Electric |
| Watts Water Technologies |
Franklin Electric and Watts Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and Watts Water
The main advantage of trading using opposite Franklin Electric and Watts Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, Watts Water 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 Watts Water will offset losses from the drop in Watts Water'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 |
| Watts Water vs. IDEX Corporation | Watts Water vs. Donaldson | Watts Water vs. Gorman Rupp | Watts Water vs. Enerpac Tool Group |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |