Correlation Between Griffon and Avadel Pharmaceuticals

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

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

Diversification Opportunities for Griffon and Avadel Pharmaceuticals

-0.18

Correlation Coefficient

Griffon  Avadel Pharmaceuticals

Good diversification

The 3 months correlation between Griffon and Avadel is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals 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 Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Griffon i.e., Griffon and Avadel Pharmaceuticals go up and down completely randomly.

Pair Corralation between Griffon and Avadel Pharmaceuticals

Considering the 90-day investment horizon Griffon is expected to generate 0.44 times more return on investment than Avadel Pharmaceuticals. However, Griffon is 2.25 times less risky than Avadel Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about -0.04 per unit of risk. If you would invest  7,266  in Griffon on December 20, 2024 and sell it today you would lose (81.00) from holding Griffon or give up 1.11% of portfolio value over 90 days.

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

Griffon  vs.  Avadel Pharmaceuticals PLC

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.

Avadel Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avadel Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Griffon and Avadel Pharmaceuticals

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

The idea behind Griffon and Avadel Pharmaceuticals 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..