Correlation Between ITOCHU and Griffon
Can any of the company-specific risk be diversified away by investing in both ITOCHU 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 ITOCHU and Griffon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITOCHU and Griffon, you can compare the effects of market volatilities on ITOCHU 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 ITOCHU with a short position of Griffon. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and Griffon.
Diversification Opportunities for ITOCHU and Griffon
Significant diversification
The 3 months correlation between ITOCHU and Griffon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and ITOCHU 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 ITOCHU 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 ITOCHU i.e., ITOCHU and Griffon go up and down completely randomly.
Pair Corralation between ITOCHU and Griffon
Assuming the 90 days horizon ITOCHU is expected to generate 1.25 times more return on investment than Griffon. However, ITOCHU is 1.25 times more volatile than Griffon. It trades about 0.05 of its potential returns per unit of risk. Griffon is currently generating about 0.04 per unit of risk. If you would invest 4,264 in ITOCHU on August 27, 2024 and sell it today you would earn a total of 882.00 from holding ITOCHU or generate 20.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITOCHU vs. Griffon
Performance |
| Timeline |
| ITOCHU |
| Griffon |
ITOCHU and Griffon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITOCHU and Griffon
The main advantage of trading using opposite ITOCHU and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU 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.| ITOCHU vs. Sumitomo Corp ADR | ITOCHU vs. Mitsui Co | ITOCHU vs. Marubeni Corp ADR | ITOCHU vs. Mitsubishi Corp |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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