Correlation Between Griffon and Magnite

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

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

Diversification Opportunities for Griffon and Magnite

0.74

Correlation Coefficient

Griffon  Magnite

Poor diversification

The 3 months correlation between Griffon and Magnite is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite 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 Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of Griffon i.e., Griffon and Magnite go up and down completely randomly.

Pair Corralation between Griffon and Magnite

Considering the 90-day investment horizon Griffon is expected to generate 0.54 times more return on investment than Magnite. However, Griffon is 1.86 times less risky than Magnite. It trades about -0.01 of its potential returns per unit of risk. Magnite is currently generating about -0.07 per unit of risk. If you would invest  7,244  in Griffon on December 23, 2024 and sell it today you would lose (164.00) from holding Griffon or give up 2.26% of portfolio value over 90 days.

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

Griffon  vs.  Magnite

Griffon

Risk-Adjusted Performance

Very Weak

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

Magnite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magnite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Griffon and Magnite

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

The idea behind Griffon and Magnite 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.