Correlation Between MARTIN and Griffon

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Can any of the company-specific risk be diversified away by investing in both MARTIN 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 MARTIN and Griffon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MARTIN MARIETTA MATLS and Griffon, you can compare the effects of market volatilities on MARTIN 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 MARTIN with a short position of Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARTIN and Griffon.

Diversification Opportunities for MARTIN and Griffon

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between MARTIN and Griffon is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding MARTIN MARIETTA MATLS and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and MARTIN 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 MARTIN MARIETTA MATLS 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 MARTIN i.e., MARTIN and Griffon go up and down completely randomly.

Pair Corralation between MARTIN and Griffon

Assuming the 90 days trading horizon MARTIN MARIETTA MATLS is expected to generate 0.2 times more return on investment than Griffon. However, MARTIN MARIETTA MATLS is 4.99 times less risky than Griffon. It trades about -0.16 of its potential returns per unit of risk. Griffon is currently generating about -0.51 per unit of risk. If you would invest  9,726  in MARTIN MARIETTA MATLS on September 29, 2024 and sell it today you would lose (66.00) from holding MARTIN MARIETTA MATLS or give up 0.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy66.67%
ValuesDaily Returns

MARTIN MARIETTA MATLS  vs.  Griffon

 Performance 
       Timeline  
MARTIN MARIETTA MATLS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MARTIN MARIETTA MATLS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARTIN 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

2 of 100

 
Weak
 
Strong
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 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.

MARTIN and Griffon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MARTIN and Griffon

The main advantage of trading using opposite MARTIN and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARTIN 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 MARTIN MARIETTA MATLS 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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