Correlation Between ATVRockN and Franklin Electric

Can any of the company-specific risk be diversified away by investing in both ATVRockN 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 ATVRockN and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ATVRockN and Franklin Electric Co, you can compare the effects of market volatilities on ATVRockN 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 ATVRockN with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATVRockN and Franklin Electric.

Diversification Opportunities for ATVRockN and Franklin Electric

0.48

Correlation Coefficient

ATVRockN  Franklin Electric

Very weak diversification

The 3 months correlation between ATVRockN and Franklin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ATVRockN and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and ATVRockN 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 ATVRockN 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 ATVRockN i.e., ATVRockN and Franklin Electric go up and down completely randomly.

Pair Corralation between ATVRockN and Franklin Electric

Given the investment horizon of 90 days ATVRockN is expected to generate 10.8 times more return on investment than Franklin Electric. However, ATVRockN is 10.8 times more volatile than Franklin Electric Co. It trades about 0.08 of its potential returns per unit of risk. Franklin Electric Co is currently generating about -0.02 per unit of risk. If you would invest  0.07  in ATVRockN on December 29, 2024 and sell it today you would earn a total of  0.01  from holding ATVRockN or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

ATVRockN  vs.  Franklin Electric Co

ATVRockN

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATVRockN are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, ATVRockN disclosed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Franklin Electric is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ATVRockN and Franklin Electric

The main advantage of trading using opposite ATVRockN and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATVRockN 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 ATVRockN 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.