Correlation Between Illinois Tool and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Illinois Tool 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 Illinois Tool and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Illinois Tool Works and Franklin Electric Co, you can compare the effects of market volatilities on Illinois Tool 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 Illinois Tool with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illinois Tool and Franklin Electric.
Diversification Opportunities for Illinois Tool and Franklin Electric
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Illinois and Franklin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Illinois Tool Works and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Illinois Tool 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 Illinois Tool Works 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 Illinois Tool i.e., Illinois Tool and Franklin Electric go up and down completely randomly.
Pair Corralation between Illinois Tool and Franklin Electric
Considering the 90-day investment horizon Illinois Tool is expected to generate 1.13 times less return on investment than Franklin Electric. But when comparing it to its historical volatility, Illinois Tool Works is 1.58 times less risky than Franklin Electric. It trades about 0.04 of its potential returns per unit of risk. Franklin Electric Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 10,321 in Franklin Electric Co on August 27, 2024 and sell it today you would earn a total of 585.00 from holding Franklin Electric Co or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illinois Tool Works vs. Franklin Electric Co
Performance |
| Timeline |
| Illinois Tool Works |
| Franklin Electric |
Illinois Tool and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illinois Tool and Franklin Electric
The main advantage of trading using opposite Illinois Tool and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illinois Tool 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.| Illinois Tool vs. Pentair PLC | Illinois Tool vs. Parker Hannifin | Illinois Tool vs. Emerson Electric | Illinois Tool vs. Smith AO |
| Franklin Electric vs. Aquagold International | Franklin Electric vs. Morningstar Unconstrained Allocation | Franklin Electric vs. High Yield Municipal Fund | Franklin Electric vs. Thrivent High Yield |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |