Correlation Between Globalfoundries and Griffon

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

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

Diversification Opportunities for Globalfoundries and Griffon

0.66

Correlation Coefficient

Globalfoundries  Griffon

Poor diversification

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

Pair Corralation between Globalfoundries and Griffon

Considering the 90-day investment horizon Globalfoundries is expected to under-perform the Griffon. In addition to that, Globalfoundries is 1.01 times more volatile than Griffon. It trades about -0.03 of its total potential returns per unit of risk. Griffon is currently generating about 0.08 per unit of volatility. If you would invest  3,969  in Griffon on October 22, 2024 and sell it today you would earn a total of  3,693  from holding Griffon or generate 93.05% return on investment over 90 days.

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

Globalfoundries  vs.  Griffon

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Griffon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 8 (%) 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.

Pair Trading with Globalfoundries and Griffon

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

The idea behind Globalfoundries and Griffon 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.