Correlation Between Griffon and Exchange Bankshares

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

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

Diversification Opportunities for Griffon and Exchange Bankshares

0.55

Correlation Coefficient

Griffon  Exchange Bankshares

Very weak diversification

The 3 months correlation between Griffon and Exchange is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares 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 Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of Griffon i.e., Griffon and Exchange Bankshares go up and down completely randomly.

Pair Corralation between Griffon and Exchange Bankshares

Considering the 90-day investment horizon Griffon is expected to generate 1.37 times more return on investment than Exchange Bankshares. However, Griffon is 1.37 times more volatile than Exchange Bankshares. It trades about 0.07 of its potential returns per unit of risk. Exchange Bankshares is currently generating about 0.02 per unit of risk. If you would invest  3,658  in Griffon on October 5, 2024 and sell it today you would earn a total of  3,539  from holding Griffon or generate 96.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	61.94%
Values	Daily Returns

Griffon  vs.  Exchange Bankshares

Griffon

Risk-Adjusted Performance

3 of 100

Weak

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 February 2025.

Exchange Bankshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bankshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Griffon and Exchange Bankshares

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

The idea behind Griffon and Exchange Bankshares 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 Global Correlations module to find global opportunities by holding instruments from different markets.