Correlation Between Enerpac Tool and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Enerpac Tool 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 Enerpac Tool and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enerpac Tool Group and Franklin Electric Co, you can compare the effects of market volatilities on Enerpac Tool 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 Enerpac Tool with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enerpac Tool and Franklin Electric.
Diversification Opportunities for Enerpac Tool and Franklin Electric
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enerpac and Franklin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Enerpac Tool Group and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Enerpac Tool 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 Enerpac Tool Group 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 Enerpac Tool i.e., Enerpac Tool and Franklin Electric go up and down completely randomly.
Pair Corralation between Enerpac Tool and Franklin Electric
Given the investment horizon of 90 days Enerpac Tool Group is expected to generate 0.7 times more return on investment than Franklin Electric. However, Enerpac Tool Group is 1.44 times less risky than Franklin Electric. It trades about 0.02 of its potential returns per unit of risk. Franklin Electric Co is currently generating about -0.06 per unit of risk. If you would invest 3,468 in Enerpac Tool Group on January 19, 2024 and sell it today you would earn a total of 7.00 from holding Enerpac Tool Group or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enerpac Tool Group vs. Franklin Electric Co
Performance |
| Timeline |
| Enerpac Tool Group |
| Franklin Electric |
Enerpac Tool and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enerpac Tool and Franklin Electric
The main advantage of trading using opposite Enerpac Tool and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enerpac Tool 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.| Enerpac Tool vs. Parker Hannifin | Enerpac Tool vs. Emerson Electric | Enerpac Tool vs. Smith AO | Enerpac Tool vs. Franklin Electric Co |
| Franklin Electric vs. Illinois Tool Works | Franklin Electric vs. Dover | Franklin Electric vs. Cummins | Franklin Electric vs. Eaton PLC |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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