Correlation Between Graham and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Graham and Franklin Electric 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 Graham and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graham and Franklin Electric Co, you can compare the effects of market volatilities on Graham and Franklin Electric 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 Graham with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Franklin Electric.
Diversification Opportunities for Graham and Franklin Electric
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Graham and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Graham 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 Graham are associated (or correlated) with Franklin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Electric has no effect on the direction of Graham i.e., Graham and Franklin Electric go up and down completely randomly.
Pair Corralation between Graham and Franklin Electric
Considering the 90-day investment horizon Graham is expected to generate 1.75 times more return on investment than Franklin Electric. However, Graham is 1.75 times more volatile than Franklin Electric Co. It trades about 0.13 of its potential returns per unit of risk. Franklin Electric Co is currently generating about 0.05 per unit of risk. If you would invest 2,754 in Graham on August 24, 2024 and sell it today you would earn a total of 1,581 from holding Graham or generate 57.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graham vs. Franklin Electric Co
Performance |
| Timeline |
| Graham |
| Franklin Electric |
Graham and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham and Franklin Electric
The main advantage of trading using opposite Graham and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham position performs unexpectedly, Franklin Electric 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 Franklin Electric will offset losses from the drop in Franklin Electric's long position.| Graham vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
| Franklin Electric vs. Illinois Tool Works | Franklin Electric vs. Small Cap Core | Franklin Electric vs. Freedom Holding Corp | Franklin Electric vs. Gfl Environmental Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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