Correlation Between Granite Construction and Pan American
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Pan American 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 Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Pan American Silver, you can compare the effects of market volatilities on Granite Construction and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Pan American.
Diversification Opportunities for Granite Construction and Pan American
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Granite and Pan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Granite Construction i.e., Granite Construction and Pan American go up and down completely randomly.
Pair Corralation between Granite Construction and Pan American
Assuming the 90 days trading horizon Granite Construction is expected to under-perform the Pan American. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction is 1.22 times less risky than Pan American. The stock trades about -0.05 of its potential returns per unit of risk. The Pan American Silver is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,059 in Pan American Silver on November 6, 2024 and sell it today you would earn a total of 240.00 from holding Pan American Silver or generate 11.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Granite Construction vs. Pan American Silver
Performance |
| Timeline |
| Granite Construction |
| Pan American Silver |
Granite Construction and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Pan American
The main advantage of trading using opposite Granite Construction and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.The idea behind Granite Construction and Pan American Silver pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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