Correlation Between Griffon and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Griffon and Century Aluminum 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 Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Griffon and Century Aluminum, you can compare the effects of market volatilities on Griffon and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Griffon and Century Aluminum.
Diversification Opportunities for Griffon and Century Aluminum
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Griffon and Century is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Griffon i.e., Griffon and Century Aluminum go up and down completely randomly.
Pair Corralation between Griffon and Century Aluminum
Considering the 90-day investment horizon Griffon is expected to generate 1.68 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, Griffon is 1.21 times less risky than Century Aluminum. It trades about 0.16 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,627 in Century Aluminum on August 27, 2024 and sell it today you would earn a total of 697.00 from holding Century Aluminum or generate 42.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Griffon vs. Century Aluminum
Performance |
| Timeline |
| Griffon |
| Century Aluminum |
Griffon and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Griffon and Century Aluminum
The main advantage of trading using opposite Griffon and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Griffon position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| Griffon vs. Steel Partners Holdings | Griffon vs. Brookfield Business Partners | Griffon vs. Tejon Ranch Co | Griffon vs. Compass Diversified Holdings |
| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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