Correlation Between Kronos Worldwide and Griffon

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

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

Diversification Opportunities for Kronos Worldwide and Griffon

-0.37

Correlation Coefficient

Kronos Worldwide  Griffon

Very good diversification

The 3 months correlation between Kronos and Griffon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kronos Worldwide and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Kronos Worldwide 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 Kronos Worldwide 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 Kronos Worldwide i.e., Kronos Worldwide and Griffon go up and down completely randomly.

Pair Corralation between Kronos Worldwide and Griffon

Considering the 90-day investment horizon Kronos Worldwide is expected to under-perform the Griffon. But the stock apears to be less risky and, when comparing its historical volatility, Kronos Worldwide is 2.63 times less risky than Griffon. The stock trades about -0.28 of its potential returns per unit of risk. The Griffon is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,980  in Griffon on September 12, 2024 and sell it today you would earn a total of  1,027  from holding Griffon or generate 14.71% return on investment over 90 days.

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

Kronos Worldwide  vs.  Griffon

Kronos Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kronos Worldwide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kronos Worldwide is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 Kronos Worldwide and Griffon

The main advantage of trading using opposite Kronos Worldwide and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kronos Worldwide 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 Kronos Worldwide 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.