Correlation Between Griffon and Olympic Steel

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

By analyzing existing cross correlation between Griffon and Olympic Steel, you can compare the effects of market volatilities on Griffon and Olympic Steel 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 Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Griffon and Olympic Steel.

Diversification Opportunities for Griffon and Olympic Steel

-0.01

Correlation Coefficient

Griffon  Olympic Steel

Good diversification

The 3 months correlation between Griffon and Olympic is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Griffon and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Griffon i.e., Griffon and Olympic Steel go up and down completely randomly.

Pair Corralation between Griffon and Olympic Steel

Considering the 90-day investment horizon Griffon is expected to generate 0.84 times more return on investment than Olympic Steel. However, Griffon is 1.19 times less risky than Olympic Steel. It trades about 0.16 of its potential returns per unit of risk. Olympic Steel is currently generating about 0.04 per unit of risk. If you would invest  3,188  in Griffon on February 15, 2024 and sell it today you would earn a total of  3,747  from holding Griffon or generate 117.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Griffon  vs.  Olympic Steel

Griffon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Griffon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Olympic Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Olympic Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Griffon and Olympic Steel

The main advantage of trading using opposite Griffon and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Griffon position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.

The idea behind Griffon and Olympic Steel 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.