Correlation Between Hitachi and Griffon

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

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

Diversification Opportunities for Hitachi and Griffon

-0.39

Correlation Coefficient

Hitachi  Griffon

Very good diversification

The 3 months correlation between Hitachi and Griffon is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon and Hitachi 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 Hitachi 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 Hitachi i.e., Hitachi and Griffon go up and down completely randomly.

Pair Corralation between Hitachi and Griffon

Assuming the 90 days horizon Hitachi is expected to generate 1.29 times less return on investment than Griffon. In addition to that, Hitachi is 1.01 times more volatile than Griffon. It trades about 0.13 of its total potential returns per unit of risk. Griffon is currently generating about 0.16 per unit of volatility. If you would invest  2,694  in Griffon on March 15, 2024 and sell it today you would earn a total of  3,989  from holding Griffon or generate 148.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hitachi  vs.  Griffon

Hitachi

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Hitachi reported solid returns over the last few months and may actually be approaching a breakup point.

Griffon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Griffon has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Hitachi and Griffon

The main advantage of trading using opposite Hitachi and Griffon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi 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 Hitachi 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.