Correlation Between Barnes and Franklin Electric

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

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

Diversification Opportunities for Barnes and Franklin Electric

0.31

Correlation Coefficient

Barnes  Franklin Electric

Weak diversification

The 3 months correlation between Barnes and Franklin is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Barnes 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 Barnes Group 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 Barnes i.e., Barnes and Franklin Electric go up and down completely randomly.

Pair Corralation between Barnes and Franklin Electric

Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.1 times more return on investment than Franklin Electric. However, Barnes Group is 9.84 times less risky than Franklin Electric. It trades about 0.45 of its potential returns per unit of risk. Franklin Electric Co is currently generating about -0.09 per unit of risk. If you would invest  4,669  in Barnes Group on September 19, 2024 and sell it today you would earn a total of  48.00  from holding Barnes Group or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barnes Group  vs.  Franklin Electric Co

Barnes Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Franklin Electric

Risk-Adjusted Performance

0 of 100

Insignificant

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Barnes and Franklin Electric

The main advantage of trading using opposite Barnes and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes 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 Barnes Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.