Correlation Between Granite Construction and MidCap Financial
Can any of the company-specific risk be diversified away by investing in both Granite Construction and MidCap Financial 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 MidCap Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and MidCap Financial Investment, you can compare the effects of market volatilities on Granite Construction and MidCap Financial 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 MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and MidCap Financial.
Diversification Opportunities for Granite Construction and MidCap Financial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Granite and MidCap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv 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 MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Granite Construction i.e., Granite Construction and MidCap Financial go up and down completely randomly.
Pair Corralation between Granite Construction and MidCap Financial
Assuming the 90 days trading horizon Granite Construction is expected to generate 1.79 times more return on investment than MidCap Financial. However, Granite Construction is 1.79 times more volatile than MidCap Financial Investment. It trades about 0.11 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.12 per unit of risk. If you would invest 7,439 in Granite Construction on October 14, 2024 and sell it today you would earn a total of 1,011 from holding Granite Construction or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. MidCap Financial Investment
Performance |
| Timeline |
| Granite Construction |
| MidCap Financial Inv |
Granite Construction and MidCap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and MidCap Financial
The main advantage of trading using opposite Granite Construction and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, MidCap Financial 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 MidCap Financial will offset losses from the drop in MidCap Financial's long position.| Granite Construction vs. Lendlease Group | Granite Construction vs. Mobilezone Holding AG | Granite Construction vs. Geely Automobile Holdings | Granite Construction vs. OPKO HEALTH |
| MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc | MidCap Financial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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