Correlation Between Franklin Electric and Twin Disc

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

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

Diversification Opportunities for Franklin Electric and Twin Disc

0.09

Correlation Coefficient

Franklin Electric  Twin Disc

Significant diversification

The 3 months correlation between Franklin and Twin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Electric Co and Twin Disc Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twin Disc and Franklin Electric 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 Electric Co are associated (or correlated) with Twin Disc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twin Disc has no effect on the direction of Franklin Electric i.e., Franklin Electric and Twin Disc go up and down completely randomly.

Pair Corralation between Franklin Electric and Twin Disc

Given the investment horizon of 90 days Franklin Electric Co is expected to generate 0.72 times more return on investment than Twin Disc. However, Franklin Electric Co is 1.38 times less risky than Twin Disc. It trades about 0.07 of its potential returns per unit of risk. Twin Disc Incorporated is currently generating about 0.02 per unit of risk. If you would invest  9,948  in Franklin Electric Co on August 31, 2024 and sell it today you would earn a total of  769.00  from holding Franklin Electric Co or generate 7.73% return on investment over 90 days.

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

Franklin Electric Co  vs.  Twin Disc Incorporated

Franklin Electric

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Electric Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Franklin Electric may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Twin Disc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Twin Disc Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Twin Disc is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Electric and Twin Disc

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

The idea behind Franklin Electric Co and Twin Disc Incorporated 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.