Correlation Between Sphere Entertainment and Griffon

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

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

Diversification Opportunities for Sphere Entertainment and Griffon

0.59

Correlation Coefficient

Sphere Entertainment  Griffon

Very weak diversification

The 3 months correlation between Sphere and Griffon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Griffon go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Griffon

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Griffon. In addition to that, Sphere Entertainment is 1.58 times more volatile than Griffon. It trades about -0.06 of its total potential returns per unit of risk. Griffon is currently generating about 0.01 per unit of volatility. If you would invest  7,182  in Griffon on December 19, 2024 and sell it today you would earn a total of  3.00  from holding Griffon or generate 0.04% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Griffon

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 nearly stable technical and fundamental indicators, Griffon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sphere Entertainment and Griffon

The main advantage of trading using opposite Sphere Entertainment and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.