Correlation Between Granite Construction and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Johnson Johnson 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 Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Johnson Johnson, you can compare the effects of market volatilities on Granite Construction and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Johnson Johnson.
Diversification Opportunities for Granite Construction and Johnson Johnson
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Granite and Johnson is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Granite Construction i.e., Granite Construction and Johnson Johnson go up and down completely randomly.
Pair Corralation between Granite Construction and Johnson Johnson
Assuming the 90 days trading horizon Granite Construction is expected to generate 2.13 times more return on investment than Johnson Johnson. However, Granite Construction is 2.13 times more volatile than Johnson Johnson. It trades about 0.22 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.09 per unit of risk. If you would invest 5,427 in Granite Construction on September 5, 2024 and sell it today you would earn a total of 3,973 from holding Granite Construction or generate 73.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. Johnson Johnson
Performance |
| Timeline |
| Granite Construction |
| Johnson Johnson |
Granite Construction and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Johnson Johnson
The main advantage of trading using opposite Granite Construction and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| Johnson Johnson vs. URBAN OUTFITTERS | Johnson Johnson vs. American Eagle Outfitters | Johnson Johnson vs. Granite Construction | Johnson Johnson vs. NISSIN FOODS HLDGS |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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