Correlation Between Granite Construction and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both Granite Construction and DAIRY FARM 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 DAIRY FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and DAIRY FARM INTL, you can compare the effects of market volatilities on Granite Construction and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and DAIRY FARM.
Diversification Opportunities for Granite Construction and DAIRY FARM
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Granite and DAIRY is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Granite Construction i.e., Granite Construction and DAIRY FARM go up and down completely randomly.
Pair Corralation between Granite Construction and DAIRY FARM
Assuming the 90 days trading horizon Granite Construction is expected to under-perform the DAIRY FARM. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction is 1.3 times less risky than DAIRY FARM. The stock trades about -0.11 of its potential returns per unit of risk. The DAIRY FARM INTL is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 226.00 in DAIRY FARM INTL on September 19, 2024 and sell it today you would lose (6.00) from holding DAIRY FARM INTL or give up 2.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. DAIRY FARM INTL
Performance |
| Timeline |
| Granite Construction |
| DAIRY FARM INTL |
Granite Construction and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and DAIRY FARM
The main advantage of trading using opposite Granite Construction and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| DAIRY FARM vs. MAVEN WIRELESS SWEDEN | DAIRY FARM vs. Consolidated Communications Holdings | DAIRY FARM vs. PennyMac Mortgage Investment | DAIRY FARM vs. Iridium Communications |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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