Correlation Between Granite Construction and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Goodyear Tire 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 Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Goodyear Tire Rubber, you can compare the effects of market volatilities on Granite Construction and Goodyear Tire 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 Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Goodyear Tire.
Diversification Opportunities for Granite Construction and Goodyear Tire
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Granite and Goodyear is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber 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 Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of Granite Construction i.e., Granite Construction and Goodyear Tire go up and down completely randomly.
Pair Corralation between Granite Construction and Goodyear Tire
Assuming the 90 days trading horizon Granite Construction is expected to generate 0.74 times more return on investment than Goodyear Tire. However, Granite Construction is 1.35 times less risky than Goodyear Tire. It trades about 0.11 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.01 per unit of risk. If you would invest 3,201 in Granite Construction on September 3, 2024 and sell it today you would earn a total of 6,049 from holding Granite Construction or generate 188.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. Goodyear Tire Rubber
Performance |
| Timeline |
| Granite Construction |
| Goodyear Tire Rubber |
Granite Construction and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Goodyear Tire
The main advantage of trading using opposite Granite Construction and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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