Correlation Between Bausch Lomb and Griffon

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

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

Diversification Opportunities for Bausch Lomb and Griffon

0.25

Correlation Coefficient

Bausch Lomb  Griffon

Modest diversification

The 3 months correlation between Bausch and Griffon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Lomb Corp and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Bausch Lomb 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 Bausch Lomb Corp 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 Bausch Lomb i.e., Bausch Lomb and Griffon go up and down completely randomly.

Pair Corralation between Bausch Lomb and Griffon

Given the investment horizon of 90 days Bausch Lomb is expected to generate 2.6 times less return on investment than Griffon. But when comparing it to its historical volatility, Bausch Lomb Corp is 1.15 times less risky than Griffon. It trades about 0.04 of its potential returns per unit of risk. Griffon is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,157  in Griffon on September 9, 2024 and sell it today you would earn a total of  4,981  from holding Griffon or generate 157.78% return on investment over 90 days.

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

Bausch Lomb Corp  vs.  Griffon

Bausch Lomb Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Lomb Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bausch Lomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Griffon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Lomb and Griffon

The main advantage of trading using opposite Bausch Lomb and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Lomb 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 Bausch Lomb Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.