Correlation Between Griffon and Allegion PLC

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

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

Diversification Opportunities for Griffon and Allegion PLC

-0.17

Correlation Coefficient

Griffon  Allegion PLC

Good diversification

The 3 months correlation between Griffon and Allegion is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Griffon 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 Griffon are associated (or correlated) with Allegion PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegion PLC has no effect on the direction of Griffon i.e., Griffon and Allegion PLC go up and down completely randomly.

Pair Corralation between Griffon and Allegion PLC

Considering the 90-day investment horizon Griffon is expected to generate 2.83 times more return on investment than Allegion PLC. However, Griffon is 2.83 times more volatile than Allegion PLC. It trades about 0.11 of its potential returns per unit of risk. Allegion PLC is currently generating about -0.18 per unit of risk. If you would invest  6,424  in Griffon on October 23, 2024 and sell it today you would earn a total of  1,238  from holding Griffon or generate 19.27% return on investment over 90 days.

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

Griffon  vs.  Allegion PLC

Griffon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 8 (%) 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.

Allegion PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegion PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Griffon and Allegion PLC

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

The idea behind Griffon and Allegion PLC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.