Correlation Between Griffon and RPM International

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

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

Diversification Opportunities for Griffon and RPM International

0.51

Correlation Coefficient

Griffon  RPM International

Very weak diversification

The 3 months correlation between Griffon and RPM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and RPM International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPM International 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 RPM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPM International has no effect on the direction of Griffon i.e., Griffon and RPM International go up and down completely randomly.

Pair Corralation between Griffon and RPM International

Considering the 90-day investment horizon Griffon is expected to generate 1.59 times more return on investment than RPM International. However, Griffon is 1.59 times more volatile than RPM International. It trades about 0.01 of its potential returns per unit of risk. RPM International is currently generating about -0.08 per unit of risk. If you would invest  7,295  in Griffon on December 26, 2024 and sell it today you would earn a total of  5.00  from holding Griffon or generate 0.07% return on investment over 90 days.

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

Griffon  vs.  RPM International

Griffon

Risk-Adjusted Performance

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.

RPM International

Risk-Adjusted Performance

Very Weak

Over the last 90 days RPM International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Griffon and RPM International

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

The idea behind Griffon and RPM International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.