Correlation Between Xylem and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Xylem 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 Xylem and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xylem Inc and Franklin Electric Co, you can compare the effects of market volatilities on Xylem 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 Xylem with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xylem and Franklin Electric.
Diversification Opportunities for Xylem and Franklin Electric
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Xylem and Franklin is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Xylem Inc and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Xylem 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 Xylem Inc 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 Xylem i.e., Xylem and Franklin Electric go up and down completely randomly.
Pair Corralation between Xylem and Franklin Electric
Considering the 90-day investment horizon Xylem Inc is expected to under-perform the Franklin Electric. But the stock apears to be less risky and, when comparing its historical volatility, Xylem Inc is 1.56 times less risky than Franklin Electric. The stock trades about -0.03 of its potential returns per unit of risk. The Franklin Electric Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 10,232 in Franklin Electric Co on August 28, 2024 and sell it today you would earn a total of 808.00 from holding Franklin Electric Co or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xylem Inc vs. Franklin Electric Co
Performance |
| Timeline |
| Xylem Inc |
| Franklin Electric |
Xylem and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xylem and Franklin Electric
The main advantage of trading using opposite Xylem and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xylem 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.| Xylem vs. Aquagold International | Xylem vs. Morningstar Unconstrained Allocation | Xylem vs. High Yield Municipal Fund | Xylem 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |