Correlation Between Franklin Wireless and DDC Enterprise

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

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

Diversification Opportunities for Franklin Wireless and DDC Enterprise

0.8

Correlation Coefficient

Franklin Wireless  DDC Enterprise

Very poor diversification

The 3 months correlation between Franklin and DDC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Wireless Corp and DDC Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDC Enterprise and Franklin Wireless 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 Wireless Corp are associated (or correlated) with DDC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDC Enterprise has no effect on the direction of Franklin Wireless i.e., Franklin Wireless and DDC Enterprise go up and down completely randomly.

Pair Corralation between Franklin Wireless and DDC Enterprise

Given the investment horizon of 90 days Franklin Wireless is expected to generate 1.49 times less return on investment than DDC Enterprise. But when comparing it to its historical volatility, Franklin Wireless Corp is 2.39 times less risky than DDC Enterprise. It trades about 0.19 of its potential returns per unit of risk. DDC Enterprise Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13.00  in DDC Enterprise Limited on December 19, 2024 and sell it today you would earn a total of  6.00  from holding DDC Enterprise Limited or generate 46.15% return on investment over 90 days.

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

Franklin Wireless Corp  vs.  DDC Enterprise Limited

Franklin Wireless Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Wireless Corp are ranked lower than 14 (%) 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.

DDC Enterprise

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DDC Enterprise Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, DDC Enterprise exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Wireless and DDC Enterprise

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

The idea behind Franklin Wireless Corp and DDC Enterprise Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.