Correlation Between Ingersoll Rand and Franklin Electric

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

By analyzing existing cross correlation between Ingersoll Rand and Franklin Electric Co, you can compare the effects of market volatilities on Ingersoll Rand and Franklin Electric 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 Ingersoll Rand with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingersoll Rand and Franklin Electric.

Diversification Opportunities for Ingersoll Rand and Franklin Electric

-0.13

Correlation Coefficient

Ingersoll Rand  Franklin Electric

Good diversification

The 3 months correlation between Ingersoll and Franklin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Ingersoll Rand 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 Ingersoll Rand are associated (or correlated) with Franklin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Electric has no effect on the direction of Ingersoll Rand i.e., Ingersoll Rand and Franklin Electric go up and down completely randomly.

Pair Corralation between Ingersoll Rand and Franklin Electric

Allowing for the 90-day total investment horizon Ingersoll Rand is expected to under-perform the Franklin Electric. In addition to that, Ingersoll Rand is 1.18 times more volatile than Franklin Electric Co. It trades about -0.11 of its total potential returns per unit of risk. Franklin Electric Co is currently generating about -0.02 per unit of volatility. If you would invest  9,702  in Franklin Electric Co on December 30, 2024 and sell it today you would lose (242.00) from holding Franklin Electric Co or give up 2.49% of portfolio value over 90 days.

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

Ingersoll Rand  vs.  Franklin Electric Co

Ingersoll Rand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ingersoll Rand has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Franklin Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Franklin Electric is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ingersoll Rand and Franklin Electric

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

The idea behind Ingersoll Rand and Franklin Electric Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.