Correlation Between Griffon and Virco Manufacturing

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

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

Diversification Opportunities for Griffon and Virco Manufacturing

0.66

Correlation Coefficient

Griffon  Virco Manufacturing

Poor diversification

The 3 months correlation between Griffon and Virco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing 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 Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of Griffon i.e., Griffon and Virco Manufacturing go up and down completely randomly.

Pair Corralation between Griffon and Virco Manufacturing

Considering the 90-day investment horizon Griffon is expected to generate 0.77 times more return on investment than Virco Manufacturing. However, Griffon is 1.3 times less risky than Virco Manufacturing. It trades about 0.15 of its potential returns per unit of risk. Virco Manufacturing is currently generating about -0.01 per unit of risk. If you would invest  6,280  in Griffon on September 11, 2024 and sell it today you would earn a total of  1,748  from holding Griffon or generate 27.83% return on investment over 90 days.

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

Griffon  vs.  Virco Manufacturing

Griffon

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 11 (%) 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.

Virco Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virco Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Virco Manufacturing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Griffon and Virco Manufacturing

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

The idea behind Griffon and Virco Manufacturing 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.