Correlation Between Cabot and Griffon

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

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

Diversification Opportunities for Cabot and Griffon

0.72

Correlation Coefficient

Cabot  Griffon

Poor diversification

The 3 months correlation between Cabot and Griffon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Cabot 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 Cabot 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 Cabot i.e., Cabot and Griffon go up and down completely randomly.

Pair Corralation between Cabot and Griffon

Considering the 90-day investment horizon Cabot is expected to generate 3.34 times less return on investment than Griffon. But when comparing it to its historical volatility, Cabot is 1.39 times less risky than Griffon. It trades about 0.01 of its potential returns per unit of risk. Griffon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,899  in Griffon on December 2, 2024 and sell it today you would earn a total of  335.00  from holding Griffon or generate 4.86% return on investment over 90 days.

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

Cabot  vs.  Griffon

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cabot and Griffon

The main advantage of trading using opposite Cabot and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot 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 Cabot 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.