Correlation Between Franklin Wireless and Davis Commodities

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

Diversification Opportunities for Franklin Wireless and Davis Commodities

0.31

Correlation Coefficient

Franklin Wireless  Davis Commodities

Weak diversification

The 3 months correlation between Franklin and Davis is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Wireless Corp and Davis Commodities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Commodities 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 Davis Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Commodities has no effect on the direction of Franklin Wireless i.e., Franklin Wireless and Davis Commodities go up and down completely randomly.

Pair Corralation between Franklin Wireless and Davis Commodities

Given the investment horizon of 90 days Franklin Wireless Corp is expected to generate 0.52 times more return on investment than Davis Commodities. However, Franklin Wireless Corp is 1.91 times less risky than Davis Commodities. It trades about 0.31 of its potential returns per unit of risk. Davis Commodities Limited is currently generating about -0.01 per unit of risk. If you would invest  451.00  in Franklin Wireless Corp on October 25, 2024 and sell it today you would earn a total of  48.00  from holding Franklin Wireless Corp or generate 10.64% return on investment over 90 days.

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

Franklin Wireless Corp  vs.  Davis Commodities Limited

Franklin Wireless Corp

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Wireless Corp are ranked lower than 12 (%) 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.

Davis Commodities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Commodities Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Davis Commodities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Franklin Wireless and Davis Commodities

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

The idea behind Franklin Wireless Corp and Davis Commodities 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.