Correlation Between Virco Manufacturing and Griffon

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

Diversification Opportunities for Virco Manufacturing and Griffon

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Virco and Griffon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Virco Manufacturing and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Virco Manufacturing 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 Virco Manufacturing 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 Virco Manufacturing i.e., Virco Manufacturing and Griffon go up and down completely randomly.

Pair Corralation between Virco Manufacturing and Griffon

Given the investment horizon of 90 days Virco Manufacturing is expected to generate 2.18 times less return on investment than Griffon. In addition to that, Virco Manufacturing is 1.18 times more volatile than Griffon. It trades about 0.07 of its total potential returns per unit of risk. Griffon is currently generating about 0.17 per unit of volatility. If you would invest  6,227  in Griffon on September 6, 2024 and sell it today you would earn a total of  2,053  from holding Griffon or generate 32.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Virco Manufacturing  vs.  Griffon

 Performance 
       Timeline  
Virco Manufacturing 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Virco Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Virco Manufacturing exhibited solid returns over the last few months and may actually be approaching a breakup point.
Griffon 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon reported solid returns over the last few months and may actually be approaching a breakup point.

Virco Manufacturing and Griffon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Virco Manufacturing and Griffon

The main advantage of trading using opposite Virco Manufacturing and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virco Manufacturing 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 Virco Manufacturing 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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