Correlation Between Digi International and Griffon

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

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

Diversification Opportunities for Digi International and Griffon

0.68

Correlation Coefficient

Digi International  Griffon

Poor diversification

The 3 months correlation between Digi and Griffon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Digi International 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 Digi International 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 Digi International i.e., Digi International and Griffon go up and down completely randomly.

Pair Corralation between Digi International and Griffon

Given the investment horizon of 90 days Digi International is expected to generate 19.85 times less return on investment than Griffon. In addition to that, Digi International is 1.05 times more volatile than Griffon. It trades about 0.0 of its total potential returns per unit of risk. Griffon is currently generating about 0.08 per unit of volatility. If you would invest  3,213  in Griffon on September 26, 2024 and sell it today you would earn a total of  4,049  from holding Griffon or generate 126.02% return on investment over 90 days.

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

Digi International  vs.  Griffon

Digi International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Griffon

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Digi International and Griffon

The main advantage of trading using opposite Digi International and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International 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 Digi International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.