Correlation Between Compass Diversified and Griffon
Can any of the company-specific risk be diversified away by investing in both Compass Diversified 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 Compass Diversified and Griffon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified and Griffon, you can compare the effects of market volatilities on Compass Diversified 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 Compass Diversified with a short position of Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and Griffon.
Diversification Opportunities for Compass Diversified and Griffon
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Compass and Griffon is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Compass Diversified 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 Compass Diversified 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 Compass Diversified i.e., Compass Diversified and Griffon go up and down completely randomly.
Pair Corralation between Compass Diversified and Griffon
Assuming the 90 days trading horizon Compass Diversified is expected to under-perform the Griffon. But the preferred stock apears to be less risky and, when comparing its historical volatility, Compass Diversified is 11.4 times less risky than Griffon. The preferred stock trades about -0.38 of its potential returns per unit of risk. The Griffon is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 6,436 in Griffon on August 28, 2024 and sell it today you would earn a total of 2,080 from holding Griffon or generate 32.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Diversified vs. Griffon
Performance |
| Timeline |
| Compass Diversified |
| Griffon |
Compass Diversified and Griffon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and Griffon
The main advantage of trading using opposite Compass Diversified and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified 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.| Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Tejon Ranch Co | Compass Diversified vs. Brookfield Business Partners |
| Griffon vs. Steel Partners Holdings | Griffon vs. Brookfield Business Partners | Griffon vs. Tejon Ranch Co | Griffon vs. Compass Diversified Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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