Correlation Between Pentair PLC and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Pentair PLC 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 Pentair PLC and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and Franklin Electric Co, you can compare the effects of market volatilities on Pentair PLC 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 Pentair PLC with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Franklin Electric.
Diversification Opportunities for Pentair PLC and Franklin Electric
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pentair and Franklin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Pentair PLC 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 Pentair PLC 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 Pentair PLC i.e., Pentair PLC and Franklin Electric go up and down completely randomly.
Pair Corralation between Pentair PLC and Franklin Electric
Considering the 90-day investment horizon Pentair PLC is expected to generate 0.38 times more return on investment than Franklin Electric. However, Pentair PLC is 2.63 times less risky than Franklin Electric. It trades about 0.35 of its potential returns per unit of risk. Franklin Electric Co is currently generating about 0.12 per unit of risk. If you would invest 9,899 in Pentair PLC on August 27, 2024 and sell it today you would earn a total of 794.00 from holding Pentair PLC or generate 8.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair PLC vs. Franklin Electric Co
Performance |
| Timeline |
| Pentair PLC |
| Franklin Electric |
Pentair PLC and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and Franklin Electric
The main advantage of trading using opposite Pentair PLC and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC 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.| Pentair PLC vs. Aquagold International | Pentair PLC vs. Morningstar Unconstrained Allocation | Pentair PLC vs. High Yield Municipal Fund | Pentair PLC vs. Thrivent High Yield |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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