Correlation Between Park Electrochemical and Griffon

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

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

Diversification Opportunities for Park Electrochemical and Griffon

0.75

Correlation Coefficient

Park Electrochemical  Griffon

Poor diversification

The 3 months correlation between Park and Griffon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Park Electrochemical 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 Park Electrochemical 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 Park Electrochemical i.e., Park Electrochemical and Griffon go up and down completely randomly.

Pair Corralation between Park Electrochemical and Griffon

Considering the 90-day investment horizon Park Electrochemical is expected to generate 1.55 times less return on investment than Griffon. In addition to that, Park Electrochemical is 1.3 times more volatile than Griffon. It trades about 0.1 of its total potential returns per unit of risk. Griffon is currently generating about 0.21 per unit of volatility. If you would invest  7,262  in Griffon on October 24, 2024 and sell it today you would earn a total of  400.00  from holding Griffon or generate 5.51% return on investment over 90 days.

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

Park Electrochemical  vs.  Griffon

Park Electrochemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Park Electrochemical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Griffon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 9 (%) 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 Park Electrochemical and Griffon

The main advantage of trading using opposite Park Electrochemical and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Electrochemical 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 Park Electrochemical 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.