Correlation Between FMC and Griffon
Can any of the company-specific risk be diversified away by investing in both FMC 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 FMC and Griffon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FMC Corporation and Griffon, you can compare the effects of market volatilities on FMC 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 FMC with a short position of Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and Griffon.
Diversification Opportunities for FMC and Griffon
Very good diversification
The 3 months correlation between FMC and Griffon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and FMC 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 FMC Corporation 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 FMC i.e., FMC and Griffon go up and down completely randomly.
Pair Corralation between FMC and Griffon
Considering the 90-day investment horizon FMC is expected to generate 2.59 times less return on investment than Griffon. But when comparing it to its historical volatility, FMC Corporation is 1.06 times less risky than Griffon. It trades about 0.03 of its potential returns per unit of risk. Griffon is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,787 in Griffon on August 28, 2024 and sell it today you would earn a total of 2,729 from holding Griffon or generate 47.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FMC Corp. vs. Griffon
Performance |
| Timeline |
| FMC Corporation |
| Griffon |
FMC and Griffon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FMC and Griffon
The main advantage of trading using opposite FMC and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC 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 FMC Corporation 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.| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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