Correlation Between Compass Diversified and Franklin Electric

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

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

Diversification Opportunities for Compass Diversified and Franklin Electric

0.01

Correlation Coefficient

Compass Diversified  Franklin Electric

Significant diversification

The 3 months correlation between Compass and Franklin is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified 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 Compass Diversified 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 Compass Diversified 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 Compass Diversified i.e., Compass Diversified and Franklin Electric go up and down completely randomly.

Pair Corralation between Compass Diversified and Franklin Electric

Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the Franklin Electric. In addition to that, Compass Diversified is 2.55 times more volatile than Franklin Electric Co. It trades about 0.0 of its total potential returns per unit of risk. Franklin Electric Co is currently generating about 0.09 per unit of volatility. If you would invest  8,910  in Franklin Electric Co on May 17, 2025 and sell it today you would earn a total of  734.00  from holding Franklin Electric Co or generate 8.24% return on investment over 90 days.

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

Compass Diversified Holdings  vs.  Franklin Electric Co

Compass Diversified

Risk-Adjusted Performance

Weakest

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Compass Diversified is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Franklin Electric

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Electric Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Franklin Electric may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Compass Diversified and Franklin Electric

The main advantage of trading using opposite Compass Diversified and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified 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 Compass Diversified 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.