Correlation Between Diageo Plc and Granite Construction
Can any of the company-specific risk be diversified away by investing in both Diageo Plc and Granite Construction 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 Diageo Plc and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo plc and Granite Construction, you can compare the effects of market volatilities on Diageo Plc and Granite Construction 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 Diageo Plc with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo Plc and Granite Construction.
Diversification Opportunities for Diageo Plc and Granite Construction
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diageo and Granite is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Diageo Plc 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 Diageo plc are associated (or correlated) with Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of Diageo Plc i.e., Diageo Plc and Granite Construction go up and down completely randomly.
Pair Corralation between Diageo Plc and Granite Construction
Assuming the 90 days horizon Diageo plc is expected to under-perform the Granite Construction. But the stock apears to be less risky and, when comparing its historical volatility, Diageo plc is 2.38 times less risky than Granite Construction. The stock trades about -0.06 of its potential returns per unit of risk. The Granite Construction is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 7,700 in Granite Construction on September 1, 2024 and sell it today you would earn a total of 1,550 from holding Granite Construction or generate 20.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Diageo plc vs. Granite Construction
Performance |
| Timeline |
| Diageo plc |
| Granite Construction |
Diageo Plc and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo Plc and Granite Construction
The main advantage of trading using opposite Diageo Plc and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo Plc position performs unexpectedly, Granite Construction 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 Granite Construction will offset losses from the drop in Granite Construction's long position.| Diageo Plc vs. Granite Construction | Diageo Plc vs. Australian Agricultural | Diageo Plc vs. DAIRY FARM INTL | Diageo Plc vs. PREMIER FOODS |
| Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc | Granite Construction vs. Apple Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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