Correlation Between Frequency Electronics and Franklin Wireless

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

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

Diversification Opportunities for Frequency Electronics and Franklin Wireless

-0.69

Correlation Coefficient

Frequency Electronics  Franklin Wireless

Excellent diversification

The 3 months correlation between Frequency and Franklin is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics 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 Frequency Electronics 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 Frequency Electronics 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 Frequency Electronics i.e., Frequency Electronics and Franklin Wireless go up and down completely randomly.

Pair Corralation between Frequency Electronics and Franklin Wireless

Given the investment horizon of 90 days Frequency Electronics is expected to under-perform the Franklin Wireless. But the stock apears to be less risky and, when comparing its historical volatility, Frequency Electronics is 1.06 times less risky than Franklin Wireless. The stock trades about -0.08 of its potential returns per unit of risk. The Franklin Wireless Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  487.00  in Franklin Wireless Corp on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Franklin Wireless Corp or generate 14.99% return on investment over 90 days.

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

Frequency Electronics  vs.  Franklin Wireless Corp

Frequency Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frequency Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Franklin Wireless Corp

Risk-Adjusted Performance

Modest

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

Pair Trading with Frequency Electronics and Franklin Wireless

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

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.