Correlation Between Franklin Electric and Kone Oyj

Can any of the company-specific risk be diversified away by investing in both Franklin Electric and Kone Oyj 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 Kone Oyj 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 Kone Oyj ADR, you can compare the effects of market volatilities on Franklin Electric and Kone Oyj 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 Kone Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Electric and Kone Oyj.

Diversification Opportunities for Franklin Electric and Kone Oyj

0.49

Correlation Coefficient

Franklin Electric  Kone Oyj

Very weak diversification

The 3 months correlation between Franklin and Kone is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Kone Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kone Oyj ADR 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 Kone Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kone Oyj ADR has no effect on the direction of Franklin Electric i.e., Franklin Electric and Kone Oyj go up and down completely randomly.

Pair Corralation between Franklin Electric and Kone Oyj

Given the investment horizon of 90 days Franklin Electric is expected to generate 15.82 times less return on investment than Kone Oyj. In addition to that, Franklin Electric is 1.01 times more volatile than Kone Oyj ADR. It trades about 0.02 of its total potential returns per unit of risk. Kone Oyj ADR is currently generating about 0.24 per unit of volatility. If you would invest  2,430  in Kone Oyj ADR on December 19, 2024 and sell it today you would earn a total of  508.00  from holding Kone Oyj ADR or generate 20.91% return on investment over 90 days.

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

Franklin Electric Co  vs.  Kone Oyj ADR

Franklin Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Electric Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Franklin Electric is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Kone Oyj ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kone Oyj ADR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking indicators, Kone Oyj showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Electric and Kone Oyj

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

The idea behind Franklin Electric Co and Kone Oyj ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.