Correlation Between Granite Construction and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Microchip Technology Incorporated, you can compare the effects of market volatilities on Granite Construction and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Microchip Technology.
Diversification Opportunities for Granite Construction and Microchip Technology
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Granite and Microchip is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Granite Construction i.e., Granite Construction and Microchip Technology go up and down completely randomly.
Pair Corralation between Granite Construction and Microchip Technology
Assuming the 90 days trading horizon Granite Construction is expected to generate 0.49 times more return on investment than Microchip Technology. However, Granite Construction is 2.03 times less risky than Microchip Technology. It trades about -0.16 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.15 per unit of risk. If you would invest 9,286 in Granite Construction on October 28, 2024 and sell it today you would lose (786.00) from holding Granite Construction or give up 8.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Granite Construction |
| Microchip Technology |
Granite Construction and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Microchip Technology
The main advantage of trading using opposite Granite Construction and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| Granite Construction vs. RCI Hospitality Holdings | Granite Construction vs. ScanSource | Granite Construction vs. PRECISION DRILLING P | Granite Construction vs. CVS Health |
| Microchip Technology vs. APPLIED MATERIALS | Microchip Technology vs. SANOK RUBBER ZY | Microchip Technology vs. VULCAN MATERIALS | Microchip Technology vs. Sumitomo Rubber Industries |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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