Correlation Between TITAN MACHINERY and Granite Construction
Can any of the company-specific risk be diversified away by investing in both TITAN MACHINERY and Granite Construction 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 TITAN MACHINERY and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TITAN MACHINERY and Granite Construction, you can compare the effects of market volatilities on TITAN MACHINERY and Granite Construction 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 TITAN MACHINERY with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of TITAN MACHINERY and Granite Construction.
Diversification Opportunities for TITAN MACHINERY and Granite Construction
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TITAN and Granite is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding TITAN MACHINERY and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and TITAN MACHINERY 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 TITAN MACHINERY are associated (or correlated) with Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of TITAN MACHINERY i.e., TITAN MACHINERY and Granite Construction go up and down completely randomly.
Pair Corralation between TITAN MACHINERY and Granite Construction
Assuming the 90 days trading horizon TITAN MACHINERY is expected to generate 8.06 times less return on investment than Granite Construction. In addition to that, TITAN MACHINERY is 1.27 times more volatile than Granite Construction. It trades about 0.03 of its total potential returns per unit of risk. Granite Construction is currently generating about 0.35 per unit of volatility. If you would invest 7,600 in Granite Construction on August 25, 2024 and sell it today you would earn a total of 1,800 from holding Granite Construction or generate 23.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
TITAN MACHINERY vs. Granite Construction
Performance |
| Timeline |
| TITAN MACHINERY |
| Granite Construction |
TITAN MACHINERY and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TITAN MACHINERY and Granite Construction
The main advantage of trading using opposite TITAN MACHINERY and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TITAN MACHINERY position performs unexpectedly, Granite Construction 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 Granite Construction will offset losses from the drop in Granite Construction's long position.| TITAN MACHINERY vs. Apple Inc | TITAN MACHINERY vs. Apple Inc | TITAN MACHINERY vs. Apple Inc | TITAN MACHINERY vs. Apple Inc |
| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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