Correlation Between Crane and Franklin Electric

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

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

Diversification Opportunities for Crane and Franklin Electric

0.56

Correlation Coefficient

Crane  Franklin Electric

Very weak diversification

The 3 months correlation between Crane and Franklin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Crane 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 Crane Company 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 Crane i.e., Crane and Franklin Electric go up and down completely randomly.

Pair Corralation between Crane and Franklin Electric

Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.6 times more return on investment than Franklin Electric. However, Crane is 1.6 times more volatile than Franklin Electric Co. It trades about 0.01 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  15,197  in Crane Company on December 28, 2024 and sell it today you would earn a total of  5.00  from holding Crane Company or generate 0.03% return on investment over 90 days.

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

Crane Company  vs.  Franklin Electric Co

Crane Company

Risk-Adjusted Performance

Weak

Over the last 90 days Crane Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crane is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 Crane and Franklin Electric

The main advantage of trading using opposite Crane and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane 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 Crane Company 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.