Correlation Between Franklin Electric and Vestas Wind

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

Diversification Opportunities for Franklin Electric and Vestas Wind

-0.65

Correlation Coefficient

Franklin Electric  Vestas Wind

Excellent diversification

The 3 months correlation between Franklin and Vestas is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Franklin Electric i.e., Franklin Electric and Vestas Wind go up and down completely randomly.

Pair Corralation between Franklin Electric and Vestas Wind

Given the investment horizon of 90 days Franklin Electric Co is expected to generate 0.56 times more return on investment than Vestas Wind. However, Franklin Electric Co is 1.78 times less risky than Vestas Wind. It trades about 0.08 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.16 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Franklin Electric Co  vs.  Vestas Wind Systems

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.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Franklin Electric and Vestas Wind

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

The idea behind Franklin Electric Co and Vestas Wind Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.