Correlation Between Granite Construction and Deere
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Deere 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 Deere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction Incorporated and Deere Company, you can compare the effects of market volatilities on Granite Construction and Deere 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 Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Deere.
Diversification Opportunities for Granite Construction and Deere
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Granite and Deere is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Incorporated are associated (or correlated) with Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of Granite Construction i.e., Granite Construction and Deere go up and down completely randomly.
Pair Corralation between Granite Construction and Deere
Considering the 90-day investment horizon Granite Construction Incorporated is expected to generate 1.13 times more return on investment than Deere. However, Granite Construction is 1.13 times more volatile than Deere Company. It trades about 0.09 of its potential returns per unit of risk. Deere Company is currently generating about 0.03 per unit of risk. If you would invest 4,235 in Granite Construction Incorporated on November 19, 2024 and sell it today you would earn a total of 4,452 from holding Granite Construction Incorporated or generate 105.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction Incorpora vs. Deere Company
Performance |
| Timeline |
| Granite Construction |
| Deere Company |
Granite Construction and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Deere
The main advantage of trading using opposite Granite Construction and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Deere 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 Deere will offset losses from the drop in Deere's long position.| Granite Construction vs. EMCOR Group | Granite Construction vs. Comfort Systems USA | Granite Construction vs. Primoris Services | Granite Construction vs. Construction Partners |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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