Correlation Between Granite Construction and China Shengmu
Can any of the company-specific risk be diversified away by investing in both Granite Construction and China Shengmu 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 China Shengmu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and China Shengmu Organic, you can compare the effects of market volatilities on Granite Construction and China Shengmu 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 China Shengmu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and China Shengmu.
Diversification Opportunities for Granite Construction and China Shengmu
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Granite and China is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and China Shengmu Organic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shengmu Organic 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 China Shengmu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shengmu Organic has no effect on the direction of Granite Construction i.e., Granite Construction and China Shengmu go up and down completely randomly.
Pair Corralation between Granite Construction and China Shengmu
Assuming the 90 days trading horizon Granite Construction is expected to generate 0.61 times more return on investment than China Shengmu. However, Granite Construction is 1.64 times less risky than China Shengmu. It trades about 0.08 of its potential returns per unit of risk. China Shengmu Organic is currently generating about 0.02 per unit of risk. If you would invest 3,894 in Granite Construction on November 28, 2024 and sell it today you would earn a total of 3,856 from holding Granite Construction or generate 99.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Granite Construction vs. China Shengmu Organic
Performance |
| Timeline |
| Granite Construction |
| China Shengmu Organic |
Granite Construction and China Shengmu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and China Shengmu
The main advantage of trading using opposite Granite Construction and China Shengmu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, China Shengmu 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 China Shengmu will offset losses from the drop in China Shengmu's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| China Shengmu vs. Daido Steel Co | China Shengmu vs. IDP EDUCATION LTD | China Shengmu vs. Khiron Life Sciences | China Shengmu vs. EMBARK EDUCATION LTD |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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