Correlation Between Franklin Electric and Nidec

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

Diversification Opportunities for Franklin Electric and Nidec

-0.07

Correlation Coefficient

Franklin Electric  Nidec

Good diversification

The 3 months correlation between Franklin and Nidec is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Franklin Electric i.e., Franklin Electric and Nidec go up and down completely randomly.

Pair Corralation between Franklin Electric and Nidec

If you would invest  9,948  in Franklin Electric Co on September 2, 2024 and sell it today you would earn a total of  882.00  from holding Franklin Electric Co or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Franklin Electric Co  vs.  Nidec

Franklin Electric

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Electric Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Franklin Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nidec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nidec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Nidec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Electric and Nidec

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

The idea behind Franklin Electric Co and Nidec 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.