Correlation Between Granite Construction and Penske Automotive
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Penske Automotive 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 Penske Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Penske Automotive Group, you can compare the effects of market volatilities on Granite Construction and Penske Automotive 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 Penske Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Penske Automotive.
Diversification Opportunities for Granite Construction and Penske Automotive
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and Penske is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Penske Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penske Automotive 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 Penske Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penske Automotive has no effect on the direction of Granite Construction i.e., Granite Construction and Penske Automotive go up and down completely randomly.
Pair Corralation between Granite Construction and Penske Automotive
Assuming the 90 days trading horizon Granite Construction is expected to generate 1.12 times more return on investment than Penske Automotive. However, Granite Construction is 1.12 times more volatile than Penske Automotive Group. It trades about 0.11 of its potential returns per unit of risk. Penske Automotive Group is currently generating about 0.04 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. Penske Automotive Group
Performance |
| Timeline |
| Granite Construction |
| Penske Automotive |
Granite Construction and Penske Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Penske Automotive
The main advantage of trading using opposite Granite Construction and Penske Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Penske Automotive 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 Penske Automotive will offset losses from the drop in Penske Automotive's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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