Correlation Between Griffon and Halma Plc

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

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

Diversification Opportunities for Griffon and Halma Plc

0.44

Correlation Coefficient

Griffon  Halma Plc

Very weak diversification

The 3 months correlation between Griffon and Halma is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma 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 Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Griffon i.e., Griffon and Halma Plc go up and down completely randomly.

Pair Corralation between Griffon and Halma Plc

Considering the 90-day investment horizon Griffon is expected to generate 1.44 times more return on investment than Halma Plc. However, Griffon is 1.44 times more volatile than Halma plc. It trades about 0.1 of its potential returns per unit of risk. Halma plc is currently generating about 0.01 per unit of risk. If you would invest  6,669  in Griffon on September 13, 2024 and sell it today you would earn a total of  1,235  from holding Griffon or generate 18.52% return on investment over 90 days.

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

Griffon  vs.  Halma 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.

Halma plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halma plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Griffon and Halma Plc

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

The idea behind Griffon and Halma 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.