Correlation Between Brookfield Business and Griffon

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

By analyzing existing cross correlation between Brookfield Business Partners and Griffon, you can compare the effects of market volatilities on Brookfield Business and Griffon 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 Brookfield Business with a short position of Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and Griffon.

Diversification Opportunities for Brookfield Business and Griffon

-0.15

Correlation Coefficient

Brookfield Business  Griffon

Good diversification

The 3 months correlation between Brookfield and Griffon is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Brookfield Business 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 Brookfield Business Partners are associated (or correlated) with Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of Brookfield Business i.e., Brookfield Business and Griffon go up and down completely randomly.

Pair Corralation between Brookfield Business and Griffon

Considering the 90-day investment horizon Brookfield Business Partners is expected to generate 1.1 times more return on investment than Griffon. However, Brookfield Business is 1.1 times more volatile than Griffon. It trades about 0.07 of its potential returns per unit of risk. Griffon is currently generating about 0.01 per unit of risk. If you would invest  2,207  in Brookfield Business Partners on December 30, 2024 and sell it today you would earn a total of  175.00  from holding Brookfield Business Partners or generate 7.93% return on investment over 90 days.

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

Brookfield Business Partners  vs.  Griffon

Brookfield Business

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Brookfield Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Griffon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Griffon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Griffon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brookfield Business and Griffon

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

The idea behind Brookfield Business Partners and Griffon 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.