Correlation Between Granite Construction and Tri Pointe
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Tri Pointe 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 Tri Pointe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Tri Pointe Homes, you can compare the effects of market volatilities on Granite Construction and Tri Pointe 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 Tri Pointe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Tri Pointe.
Diversification Opportunities for Granite Construction and Tri Pointe
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Granite and Tri is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Tri Pointe Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Pointe Homes 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 Tri Pointe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Pointe Homes has no effect on the direction of Granite Construction i.e., Granite Construction and Tri Pointe go up and down completely randomly.
Pair Corralation between Granite Construction and Tri Pointe
Assuming the 90 days trading horizon Granite Construction is expected to generate 0.95 times more return on investment than Tri Pointe. However, Granite Construction is 1.06 times less risky than Tri Pointe. It trades about 0.11 of its potential returns per unit of risk. Tri Pointe Homes is currently generating about 0.09 per unit of risk. If you would invest 3,240 in Granite Construction on September 12, 2024 and sell it today you would earn a total of 5,860 from holding Granite Construction or generate 180.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. Tri Pointe Homes
Performance |
| Timeline |
| Granite Construction |
| Tri Pointe Homes |
Granite Construction and Tri Pointe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Tri Pointe
The main advantage of trading using opposite Granite Construction and Tri Pointe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Tri Pointe 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 Tri Pointe will offset losses from the drop in Tri Pointe's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| Tri Pointe vs. Lennar | Tri Pointe vs. Sekisui Chemical Co | Tri Pointe vs. Superior Plus Corp | Tri Pointe vs. SIVERS SEMICONDUCTORS AB |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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