Correlation Between Griffon and U Power

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

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

Diversification Opportunities for Griffon and U Power

-0.45

Correlation Coefficient

Griffon  U Power

Very good diversification

The 3 months correlation between Griffon and UCAR is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and U Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Power Limited 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 U Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Power Limited has no effect on the direction of Griffon i.e., Griffon and U Power go up and down completely randomly.

Pair Corralation between Griffon and U Power

Considering the 90-day investment horizon Griffon is expected to generate 0.58 times more return on investment than U Power. However, Griffon is 1.72 times less risky than U Power. It trades about 0.12 of its potential returns per unit of risk. U Power Limited is currently generating about 0.04 per unit of risk. If you would invest  6,422  in Griffon on October 26, 2024 and sell it today you would earn a total of  1,391  from holding Griffon or generate 21.66% return on investment over 90 days.

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

Griffon  vs.  U Power Limited

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.

U Power Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, U Power may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Griffon and U Power

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

The idea behind Griffon and U Power Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.