Correlation Between Franklin Electric and XCHG Limited
Can any of the company-specific risk be diversified away by investing in both Franklin Electric and XCHG Limited 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 XCHG Limited 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 XCHG Limited American, you can compare the effects of market volatilities on Franklin Electric and XCHG Limited 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 XCHG Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and XCHG Limited.
Diversification Opportunities for Franklin Electric and XCHG Limited
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and XCHG is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and XCHG Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCHG Limited American 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 XCHG Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCHG Limited American has no effect on the direction of Franklin Electric i.e., Franklin Electric and XCHG Limited go up and down completely randomly.
Pair Corralation between Franklin Electric and XCHG Limited
Given the investment horizon of 90 days Franklin Electric Co is expected to generate 0.33 times more return on investment than XCHG Limited. However, Franklin Electric Co is 3.07 times less risky than XCHG Limited. It trades about 0.14 of its potential returns per unit of risk. XCHG Limited American is currently generating about -0.39 per unit of risk. If you would invest 10,232 in Franklin Electric Co on August 27, 2024 and sell it today you would earn a total of 808.00 from holding Franklin Electric Co or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Electric Co vs. XCHG Limited American
Performance |
| Timeline |
| Franklin Electric |
| XCHG Limited American |
Franklin Electric and XCHG Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Electric and XCHG Limited
The main advantage of trading using opposite Franklin Electric and XCHG Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, XCHG Limited 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 XCHG Limited will offset losses from the drop in XCHG Limited'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 |
| XCHG Limited vs. Graco Inc | XCHG Limited vs. Franklin Electric Co | XCHG Limited vs. Flowserve | XCHG Limited vs. Donaldson |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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