Correlation Between TPI Composites and Franklin Electric

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

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

Diversification Opportunities for TPI Composites and Franklin Electric

-0.43

Correlation Coefficient

TPI Composites  Franklin Electric

Very good diversification

The 3 months correlation between TPI and Franklin is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding TPI Composites and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and TPI Composites 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 TPI Composites 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 TPI Composites i.e., TPI Composites and Franklin Electric go up and down completely randomly.

Pair Corralation between TPI Composites and Franklin Electric

Given the investment horizon of 90 days TPI Composites is expected to under-perform the Franklin Electric. In addition to that, TPI Composites is 5.28 times more volatile than Franklin Electric Co. It trades about -0.16 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  9,811  in Franklin Electric Co on December 20, 2024 and sell it today you would earn a total of  146.00  from holding Franklin Electric Co or generate 1.49% return on investment over 90 days.

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

TPI Composites  vs.  Franklin Electric Co

TPI Composites

Risk-Adjusted Performance

Weak

Over the last 90 days TPI Composites has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Franklin Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Electric Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Franklin Electric is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TPI Composites and Franklin Electric

The main advantage of trading using opposite TPI Composites and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPI Composites 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 TPI Composites 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.