Correlation Between Griffon and Kodiak Gas

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

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

Diversification Opportunities for Griffon and Kodiak Gas

0.7

Correlation Coefficient

Griffon  Kodiak Gas

Poor diversification

The 3 months correlation between Griffon and Kodiak is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Kodiak Gas Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Gas Services, 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 Kodiak Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Gas Services, has no effect on the direction of Griffon i.e., Griffon and Kodiak Gas go up and down completely randomly.

Pair Corralation between Griffon and Kodiak Gas

Considering the 90-day investment horizon Griffon is expected to generate 3.24 times less return on investment than Kodiak Gas. But when comparing it to its historical volatility, Griffon is 1.35 times less risky than Kodiak Gas. It trades about 0.21 of its potential returns per unit of risk. Kodiak Gas Services, is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  4,006  in Kodiak Gas Services, on October 24, 2024 and sell it today you would earn a total of  816.00  from holding Kodiak Gas Services, or generate 20.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Griffon  vs.  Kodiak Gas Services,

Griffon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 9 (%) 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.

Kodiak Gas Services,

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Griffon and Kodiak Gas

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

The idea behind Griffon and Kodiak Gas Services, 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.