Correlation Between Griffon and MASTERCARD

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

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

Diversification Opportunities for Griffon and MASTERCARD

-0.29

Correlation Coefficient

Griffon  MASTERCARD

Very good diversification

The 3 months correlation between Griffon and MASTERCARD is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and MASTERCARD INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASTERCARD INC 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 MASTERCARD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASTERCARD INC has no effect on the direction of Griffon i.e., Griffon and MASTERCARD go up and down completely randomly.

Pair Corralation between Griffon and MASTERCARD

Considering the 90-day investment horizon Griffon is expected to generate 2.83 times more return on investment than MASTERCARD. However, Griffon is 2.83 times more volatile than MASTERCARD INC. It trades about 0.16 of its potential returns per unit of risk. MASTERCARD INC is currently generating about -0.1 per unit of risk. If you would invest  6,348  in Griffon on September 4, 2024 and sell it today you would earn a total of  1,934  from holding Griffon or generate 30.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Griffon  vs.  MASTERCARD INC

Griffon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 12 (%) 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.

MASTERCARD INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASTERCARD INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MASTERCARD 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 MASTERCARD

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

The idea behind Griffon and MASTERCARD 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 Commodity Directory module to find actively traded commodities issued by global exchanges.