Correlation Between 58013MEV2 and Griffon

Can any of the company-specific risk be diversified away by investing in both 58013MEV2 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 58013MEV2 and Griffon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MCDONALDS P MEDIUM and Griffon, you can compare the effects of market volatilities on 58013MEV2 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 58013MEV2 with a short position of Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of 58013MEV2 and Griffon.

Diversification Opportunities for 58013MEV2 and Griffon

-0.05

Correlation Coefficient

58013MEV2  Griffon

Good diversification

The 3 months correlation between 58013MEV2 and Griffon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding MCDONALDS P MEDIUM and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and 58013MEV2 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 MCDONALDS P MEDIUM 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 58013MEV2 i.e., 58013MEV2 and Griffon go up and down completely randomly.

Pair Corralation between 58013MEV2 and Griffon

Assuming the 90 days trading horizon MCDONALDS P MEDIUM is expected to generate 0.48 times more return on investment than Griffon. However, MCDONALDS P MEDIUM is 2.11 times less risky than Griffon. It trades about -0.02 of its potential returns per unit of risk. Griffon is currently generating about -0.13 per unit of risk. If you would invest  9,025  in MCDONALDS P MEDIUM on November 29, 2024 and sell it today you would lose (111.00) from holding MCDONALDS P MEDIUM or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.33%
Values	Daily Returns

MCDONALDS P MEDIUM  vs.  Griffon

MCDONALDS P MEDIUM

Risk-Adjusted Performance

Very Weak

Over the last 90 days MCDONALDS P MEDIUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 58013MEV2 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

Very Weak

Over the last 90 days Griffon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with 58013MEV2 and Griffon

The main advantage of trading using opposite 58013MEV2 and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 58013MEV2 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 MCDONALDS P MEDIUM 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.