Correlation Between Griffon and Matthews International

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

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

Diversification Opportunities for Griffon and Matthews International

-0.16

Correlation Coefficient

Griffon  Matthews International

Good diversification

The 3 months correlation between Griffon and Matthews is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Matthews International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews International and Griffon 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 Griffon are associated (or correlated) with Matthews International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews International has no effect on the direction of Griffon i.e., Griffon and Matthews International go up and down completely randomly.

Pair Corralation between Griffon and Matthews International

Considering the 90-day investment horizon Griffon is expected to under-perform the Matthews International. But the stock apears to be less risky and, when comparing its historical volatility, Griffon is 1.06 times less risky than Matthews International. The stock trades about -0.11 of its potential returns per unit of risk. The Matthews International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,855  in Matthews International on February 3, 2024 and sell it today you would earn a total of  4.00  from holding Matthews International or generate 0.14% return on investment over 90 days.

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

Griffon  vs.  Matthews International

Griffon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 8 (%) 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.

Matthews International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Matthews International is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Griffon and Matthews International

The main advantage of trading using opposite Griffon and Matthews International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Griffon position performs unexpectedly, Matthews International 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 Matthews International will offset losses from the drop in Matthews International's long position.

The idea behind Griffon and Matthews International 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.