Correlation Between Griffon and GMS

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

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

Diversification Opportunities for Griffon and GMS

0.48

Correlation Coefficient

Griffon  GMS

Very weak diversification

The 3 months correlation between Griffon and GMS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Griffon i.e., Griffon and GMS go up and down completely randomly.

Pair Corralation between Griffon and GMS

Considering the 90-day investment horizon Griffon is expected to generate 1.34 times more return on investment than GMS. However, Griffon is 1.34 times more volatile than GMS Inc. It trades about 0.08 of its potential returns per unit of risk. GMS Inc is currently generating about 0.07 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Griffon  vs.  GMS Inc

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.

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, GMS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Griffon and GMS

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

The idea behind Griffon and GMS Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.