Correlation Between IDEX and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both IDEX 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 IDEX and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Franklin Electric Co, you can compare the effects of market volatilities on IDEX 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 IDEX with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Franklin Electric.
Diversification Opportunities for IDEX and Franklin Electric
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IDEX and Franklin is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and Franklin Electric go up and down completely randomly.
Pair Corralation between IDEX and Franklin Electric
Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.92 times more return on investment than Franklin Electric. However, IDEX Corporation is 1.09 times less risky than Franklin Electric. It trades about -0.21 of its potential returns per unit of risk. Franklin Electric Co is currently generating about -0.29 per unit of risk. If you would invest 19,298 in IDEX Corporation on December 23, 2024 and sell it today you would lose (1,107) from holding IDEX Corporation or give up 5.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Franklin Electric Co
Performance |
| Timeline |
| IDEX |
| Franklin Electric |
IDEX and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Franklin Electric
The main advantage of trading using opposite IDEX and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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.The idea behind IDEX Corporation and Franklin Electric Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Franklin Electric vs. Graco Inc | Franklin Electric vs. Ametek Inc | Franklin Electric vs. Flowserve | Franklin Electric 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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