Correlation Between Franklin Electric and Fanuc

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

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

Diversification Opportunities for Franklin Electric and Fanuc

0.3

Correlation Coefficient

Franklin Electric  Fanuc

Weak diversification

The 3 months correlation between Franklin and Fanuc is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and Franklin Electric 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 Franklin Electric Co are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Franklin Electric i.e., Franklin Electric and Fanuc go up and down completely randomly.

Pair Corralation between Franklin Electric and Fanuc

Given the investment horizon of 90 days Franklin Electric Co is expected to under-perform the Fanuc. But the stock apears to be less risky and, when comparing its historical volatility, Franklin Electric Co is 3.73 times less risky than Fanuc. The stock trades about -0.02 of its potential returns per unit of risk. The Fanuc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,512  in Fanuc on December 29, 2024 and sell it today you would earn a total of  244.00  from holding Fanuc or generate 9.71% return on investment over 90 days.

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

Franklin Electric Co  vs.  Fanuc

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.

Fanuc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fanuc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fanuc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Electric and Fanuc

The main advantage of trading using opposite Franklin Electric and Fanuc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Electric position performs unexpectedly, Fanuc 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 Fanuc will offset losses from the drop in Fanuc's long position.

The idea behind Franklin Electric Co and Fanuc 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.