Correlation Between Granite Construction and China Resources
Can any of the company-specific risk be diversified away by investing in both Granite Construction and China Resources 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 Resources 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 Resources Beer, you can compare the effects of market volatilities on Granite Construction and China Resources 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 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and China Resources.
Diversification Opportunities for Granite Construction and China Resources
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Granite and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Granite Construction i.e., Granite Construction and China Resources go up and down completely randomly.
Pair Corralation between Granite Construction and China Resources
Assuming the 90 days trading horizon Granite Construction is expected to generate 0.71 times more return on investment than China Resources. However, Granite Construction is 1.4 times less risky than China Resources. It trades about 0.31 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.09 per unit of risk. If you would invest 7,700 in Granite Construction on September 1, 2024 and sell it today you would earn a total of 1,550 from holding Granite Construction or generate 20.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. China Resources Beer
Performance |
| Timeline |
| Granite Construction |
| China Resources Beer |
Granite Construction and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and China Resources
The main advantage of trading using opposite Granite Construction and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, China Resources 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 Resources will offset losses from the drop in China Resources' long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Superior Plus Corp | China Resources vs. NMI Holdings | China Resources vs. Origin Agritech |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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