Correlation Between Toro and Griffon

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

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

Diversification Opportunities for Toro and Griffon

0.53

Correlation Coefficient

Toro  Griffon

Very weak diversification

The 3 months correlation between Toro and Griffon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Toro 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 Toro 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 Toro i.e., Toro and Griffon go up and down completely randomly.

Pair Corralation between Toro and Griffon

Considering the 90-day investment horizon Toro Co is expected to generate 0.88 times more return on investment than Griffon. However, Toro Co is 1.14 times less risky than Griffon. It trades about -0.14 of its potential returns per unit of risk. Griffon is currently generating about -0.36 per unit of risk. If you would invest  8,511  in Toro Co on September 23, 2024 and sell it today you would lose (363.00) from holding Toro Co or give up 4.27% of portfolio value over 90 days.

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

Toro Co  vs.  Griffon

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toro and Griffon

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

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.