Correlation Between Griffon and HONEYWELL

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

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

Diversification Opportunities for Griffon and HONEYWELL

-0.45

Correlation Coefficient

Griffon  HONEYWELL

Very good diversification

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

Pair Corralation between Griffon and HONEYWELL

Considering the 90-day investment horizon Griffon is expected to under-perform the HONEYWELL. But the stock apears to be less risky and, when comparing its historical volatility, Griffon is 3.85 times less risky than HONEYWELL. The stock trades about -0.33 of its potential returns per unit of risk. The HONEYWELL INTERNATIONAL INC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,607  in HONEYWELL INTERNATIONAL INC on October 13, 2024 and sell it today you would lose (80.00) from holding HONEYWELL INTERNATIONAL INC or give up 1.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.95%
Values	Daily Returns

Griffon  vs.  HONEYWELL INTERNATIONAL INC

Griffon

Risk-Adjusted Performance

2 of 100

Insignificant

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 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.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days HONEYWELL INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HONEYWELL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Griffon and HONEYWELL

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

The idea behind Griffon and HONEYWELL INTERNATIONAL INC 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 Stocks Directory module to find actively traded stocks across global markets.