Correlation Between Griffon and Tenaris SA

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

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

Diversification Opportunities for Griffon and Tenaris SA

0.8

Correlation Coefficient

Griffon  Tenaris SA

Very poor diversification

The 3 months correlation between Griffon and Tenaris is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR 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 Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA ADR has no effect on the direction of Griffon i.e., Griffon and Tenaris SA go up and down completely randomly.

Pair Corralation between Griffon and Tenaris SA

Considering the 90-day investment horizon Griffon is expected to generate 1.63 times more return on investment than Tenaris SA. However, Griffon is 1.63 times more volatile than Tenaris SA ADR. It trades about 0.08 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.04 per unit of risk. If you would invest  4,551  in Griffon on September 23, 2024 and sell it today you would earn a total of  2,733  from holding Griffon or generate 60.05% return on investment over 90 days.

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

Griffon  vs.  Tenaris SA ADR

Griffon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tenaris SA ADR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Griffon and Tenaris SA

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

The idea behind Griffon and Tenaris SA ADR 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.