Correlation Between Chemours and Griffon

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

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

Diversification Opportunities for Chemours and Griffon

0.79

Correlation Coefficient

Chemours  Griffon

Poor diversification

The 3 months correlation between Chemours and Griffon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Chemours 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 Chemours Co 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 Chemours i.e., Chemours and Griffon go up and down completely randomly.

Pair Corralation between Chemours and Griffon

Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the Griffon. In addition to that, Chemours is 1.32 times more volatile than Griffon. It trades about -0.03 of its total potential returns per unit of risk. Griffon is currently generating about 0.09 per unit of volatility. If you would invest  4,089  in Griffon on September 12, 2024 and sell it today you would earn a total of  3,918  from holding Griffon or generate 95.82% return on investment over 90 days.

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

Chemours Co  vs.  Griffon

Chemours

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chemours Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Chemours exhibited solid returns over the last few months and may actually be approaching a breakup point.

Griffon

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 10 (%) 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.

Pair Trading with Chemours and Griffon

The main advantage of trading using opposite Chemours and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours 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 Chemours Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.