Correlation Between Griffon and Liberty Broadband

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

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

Diversification Opportunities for Griffon and Liberty Broadband

0.32

Correlation Coefficient

Griffon  Liberty Broadband

Weak diversification

The 3 months correlation between Griffon and Liberty is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Liberty Broadband Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Corp 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Corp has no effect on the direction of Griffon i.e., Griffon and Liberty Broadband go up and down completely randomly.

Pair Corralation between Griffon and Liberty Broadband

Considering the 90-day investment horizon Griffon is expected to generate 4.49 times more return on investment than Liberty Broadband. However, Griffon is 4.49 times more volatile than Liberty Broadband Corp. It trades about 0.16 of its potential returns per unit of risk. Liberty Broadband Corp is currently generating about 0.08 per unit of risk. If you would invest  6,267  in Griffon on September 5, 2024 and sell it today you would earn a total of  2,015  from holding Griffon or generate 32.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Griffon  vs.  Liberty Broadband Corp

Griffon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 12 (%) 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.

Liberty Broadband Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Griffon and Liberty Broadband

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

The idea behind Griffon and Liberty Broadband Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.