Correlation Between Timken and Franklin Wireless
Can any of the company-specific risk be diversified away by investing in both Timken and Franklin Wireless 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 Timken and Franklin Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Franklin Wireless Corp, you can compare the effects of market volatilities on Timken and Franklin Wireless 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 Timken with a short position of Franklin Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Franklin Wireless.
Diversification Opportunities for Timken and Franklin Wireless
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Timken and Franklin is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp and Timken 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 Timken Company are associated (or correlated) with Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of Timken i.e., Timken and Franklin Wireless go up and down completely randomly.
Pair Corralation between Timken and Franklin Wireless
Considering the 90-day investment horizon Timken is expected to generate 4.04 times less return on investment than Franklin Wireless. But when comparing it to its historical volatility, Timken Company is 1.22 times less risky than Franklin Wireless. It trades about 0.02 of its potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 295.00 in Franklin Wireless Corp on September 4, 2024 and sell it today you would earn a total of 130.00 from holding Franklin Wireless Corp or generate 44.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timken Company vs. Franklin Wireless Corp
Performance |
| Timeline |
| Timken Company |
| Franklin Wireless Corp |
Timken and Franklin Wireless Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Franklin Wireless
The main advantage of trading using opposite Timken and Franklin Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Franklin Wireless 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 Wireless will offset losses from the drop in Franklin Wireless' long position.The idea behind Timken Company and Franklin Wireless Corp 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 Wireless vs. Cambium Networks Corp | Franklin Wireless vs. KVH Industries | Franklin Wireless vs. Knowles Cor | Franklin Wireless vs. AudioCodes |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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