Correlation Between Granite Construction and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Titan Machinery 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 Granite Construction and Titan Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Titan Machinery, you can compare the effects of market volatilities on Granite Construction and Titan Machinery 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 Granite Construction with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Titan Machinery.
Diversification Opportunities for Granite Construction and Titan Machinery
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Granite and Titan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Granite Construction 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 Granite Construction are associated (or correlated) with Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Granite Construction i.e., Granite Construction and Titan Machinery go up and down completely randomly.
Pair Corralation between Granite Construction and Titan Machinery
Assuming the 90 days trading horizon Granite Construction is expected to under-perform the Titan Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction is 1.68 times less risky than Titan Machinery. The stock trades about -0.06 of its potential returns per unit of risk. The Titan Machinery is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,350 in Titan Machinery on November 5, 2024 and sell it today you would earn a total of 380.00 from holding Titan Machinery or generate 28.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Granite Construction vs. Titan Machinery
Performance |
| Timeline |
| Granite Construction |
| Titan Machinery |
Granite Construction and Titan Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Titan Machinery
The main advantage of trading using opposite Granite Construction and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.| Granite Construction vs. PLAYMATES TOYS | Granite Construction vs. Media and Games | Granite Construction vs. SIEM OFFSHORE NEW | Granite Construction vs. British American Tobacco |
| Titan Machinery vs. Sunstone Hotel Investors | Titan Machinery vs. United Breweries Co | Titan Machinery vs. SAN MIGUEL BREWERY | Titan Machinery vs. Hyatt Hotels |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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