Correlation Between Griffon and Valmont Industries

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

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

Diversification Opportunities for Griffon and Valmont Industries

0.62

Correlation Coefficient

Griffon  Valmont Industries

Poor diversification

The 3 months correlation between Griffon and Valmont is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of Griffon i.e., Griffon and Valmont Industries go up and down completely randomly.

Pair Corralation between Griffon and Valmont Industries

Considering the 90-day investment horizon Griffon is expected to under-perform the Valmont Industries. But the stock apears to be less risky and, when comparing its historical volatility, Griffon is 1.41 times less risky than Valmont Industries. The stock trades about -0.13 of its potential returns per unit of risk. The Valmont Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  34,719  in Valmont Industries on November 28, 2024 and sell it today you would earn a total of  31.00  from holding Valmont Industries or generate 0.09% return on investment over 90 days.

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

Griffon  vs.  Valmont Industries

Griffon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Griffon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Valmont Industries

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Valmont Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Griffon and Valmont Industries

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

The idea behind Griffon and Valmont Industries 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.