Correlation Between Granite Construction and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Westlake Chemical 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 Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Westlake Chemical, you can compare the effects of market volatilities on Granite Construction and Westlake Chemical 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 Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Westlake Chemical.
Diversification Opportunities for Granite Construction and Westlake Chemical
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Granite and Westlake is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical has no effect on the direction of Granite Construction i.e., Granite Construction and Westlake Chemical go up and down completely randomly.
Pair Corralation between Granite Construction and Westlake Chemical
Assuming the 90 days trading horizon Granite Construction is expected to generate 1.67 times more return on investment than Westlake Chemical. However, Granite Construction is 1.67 times more volatile than Westlake Chemical. It trades about 0.26 of its potential returns per unit of risk. Westlake Chemical is currently generating about 0.02 per unit of risk. If you would invest 7,950 in Granite Construction on September 2, 2024 and sell it today you would earn a total of 1,300 from holding Granite Construction or generate 16.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction vs. Westlake Chemical
Performance |
| Timeline |
| Granite Construction |
| Westlake Chemical |
Granite Construction and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Westlake Chemical
The main advantage of trading using opposite Granite Construction and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Westlake Chemical 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 Westlake Chemical will offset losses from the drop in Westlake Chemical's long position.| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
| Westlake Chemical vs. UNITED UTILITIES GR | Westlake Chemical vs. DATANG INTL POW | Westlake Chemical vs. G III Apparel Group | Westlake Chemical vs. TERADATA |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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