Correlation Between Griffin Mining and London Security

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

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

Diversification Opportunities for Griffin Mining and London Security

0.41

Correlation Coefficient

Griffin Mining  London Security

Very weak diversification

The 3 months correlation between Griffin and London is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Griffin Mining and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc and Griffin Mining 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 Griffin Mining are associated (or correlated) with London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Griffin Mining i.e., Griffin Mining and London Security go up and down completely randomly.

Pair Corralation between Griffin Mining and London Security

Assuming the 90 days trading horizon Griffin Mining is expected to generate 1.75 times more return on investment than London Security. However, Griffin Mining is 1.75 times more volatile than London Security Plc. It trades about 0.02 of its potential returns per unit of risk. London Security Plc is currently generating about -0.19 per unit of risk. If you would invest  14,400  in Griffin Mining on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Griffin Mining or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Griffin Mining  vs.  London Security Plc

Griffin Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffin Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Griffin Mining is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Griffin Mining and London Security

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

The idea behind Griffin Mining and London Security Plc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.