Correlation Between Thermon Group and Franklin Electric

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

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

Diversification Opportunities for Thermon Group and Franklin Electric

0.16

Correlation Coefficient

Thermon Group  Franklin Electric

Average diversification

The 3 months correlation between Thermon and Franklin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Thermon Group 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 Thermon Group Holdings 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 Thermon Group i.e., Thermon Group and Franklin Electric go up and down completely randomly.

Pair Corralation between Thermon Group and Franklin Electric

Considering the 90-day investment horizon Thermon Group Holdings is expected to generate 1.44 times more return on investment than Franklin Electric. However, Thermon Group is 1.44 times more volatile than Franklin Electric Co. It trades about 0.02 of its potential returns per unit of risk. Franklin Electric Co is currently generating about 0.01 per unit of risk. If you would invest  2,848  in Thermon Group Holdings on December 29, 2024 and sell it today you would earn a total of  47.00  from holding Thermon Group Holdings or generate 1.65% return on investment over 90 days.

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

Thermon Group Holdings  vs.  Franklin Electric Co

Thermon Group Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thermon Group Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Thermon Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the 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 Thermon Group and Franklin Electric

The main advantage of trading using opposite Thermon Group and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermon Group 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 Thermon Group Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .