Correlation Between DAIRY FARM and Granite Construction
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM 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 DAIRY FARM and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and Granite Construction, you can compare the effects of market volatilities on DAIRY FARM 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 DAIRY FARM with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Granite Construction.
Diversification Opportunities for DAIRY FARM and Granite Construction
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DAIRY and Granite is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Granite Construction go up and down completely randomly.
Pair Corralation between DAIRY FARM and Granite Construction
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the Granite Construction. In addition to that, DAIRY FARM is 1.13 times more volatile than Granite Construction. It trades about -0.18 of its total potential returns per unit of risk. Granite Construction is currently generating about -0.11 per unit of volatility. If you would invest 9,386 in Granite Construction on October 26, 2024 and sell it today you would lose (536.00) from holding Granite Construction or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. Granite Construction
Performance |
| Timeline |
| DAIRY FARM INTL |
| Granite Construction |
DAIRY FARM and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and Granite Construction
The main advantage of trading using opposite DAIRY FARM and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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.The idea behind DAIRY FARM INTL and Granite Construction 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.| Granite Construction vs. Virtus Investment Partners | Granite Construction vs. CHRYSALIS INVESTMENTS LTD | Granite Construction vs. CDL INVESTMENT | Granite Construction vs. IMAGIN MEDICAL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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