Correlation Between Griffon and Compass Diversified

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

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

Diversification Opportunities for Griffon and Compass Diversified

0.22

Correlation Coefficient

Griffon  Compass Diversified

Modest diversification

The 3 months correlation between Griffon and Compass is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Griffon i.e., Griffon and Compass Diversified go up and down completely randomly.

Pair Corralation between Griffon and Compass Diversified

Considering the 90-day investment horizon Griffon is expected to generate 1.11 times more return on investment than Compass Diversified. However, Griffon is 1.11 times more volatile than Compass Diversified Holdings. It trades about 0.02 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about -0.16 per unit of risk. If you would invest  7,086  in Griffon on December 29, 2024 and sell it today you would earn a total of  110.00  from holding Griffon or generate 1.55% return on investment over 90 days.

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

Griffon  vs.  Compass Diversified Holdings

Griffon

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Griffon and Compass Diversified

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

The idea behind Griffon and Compass Diversified Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..