Correlation Between Granite Construction and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Boston Beer 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 Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and The Boston Beer, you can compare the effects of market volatilities on Granite Construction and Boston Beer 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 Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Boston Beer.
Diversification Opportunities for Granite Construction and Boston Beer
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Granite and Boston is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Granite Construction i.e., Granite Construction and Boston Beer go up and down completely randomly.
Pair Corralation between Granite Construction and Boston Beer
Assuming the 90 days trading horizon Granite Construction is expected to generate 1.18 times more return on investment than Boston Beer. However, Granite Construction is 1.18 times more volatile than The Boston Beer. It trades about -0.07 of its potential returns per unit of risk. The Boston Beer is currently generating about -0.4 per unit of risk. If you would invest 8,650 in Granite Construction on November 7, 2024 and sell it today you would lose (300.00) from holding Granite Construction or give up 3.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Granite Construction vs. The Boston Beer
Performance |
| Timeline |
| Granite Construction |
| Boston Beer |
Granite Construction and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Boston Beer
The main advantage of trading using opposite Granite Construction and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.The idea behind Granite Construction and The Boston Beer 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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