Correlation Between GENERAL and Griffon

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

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

Diversification Opportunities for GENERAL and Griffon

0.36

Correlation Coefficient

GENERAL  Griffon

Weak diversification

The 3 months correlation between GENERAL and Griffon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and GENERAL 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 GENERAL ELEC CAP 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 GENERAL i.e., GENERAL and Griffon go up and down completely randomly.

Pair Corralation between GENERAL and Griffon

Assuming the 90 days trading horizon GENERAL is expected to generate 32.96 times less return on investment than Griffon. But when comparing it to its historical volatility, GENERAL ELEC CAP is 2.1 times less risky than Griffon. It trades about 0.0 of its potential returns per unit of risk. Griffon is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,487  in Griffon on October 11, 2024 and sell it today you would earn a total of  3,729  from holding Griffon or generate 106.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.8%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Griffon

GENERAL ELEC CAP

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Griffon

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GENERAL and Griffon

The main advantage of trading using opposite GENERAL and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL 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 GENERAL ELEC CAP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.