Correlation Between Granite Construction and ECGI Holdings
Can any of the company-specific risk be diversified away by investing in both Granite Construction and ECGI Holdings 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 ECGI Holdings 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 ECGI Holdings, you can compare the effects of market volatilities on Granite Construction and ECGI Holdings 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 ECGI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and ECGI Holdings.
Diversification Opportunities for Granite Construction and ECGI Holdings
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Granite and ECGI is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and ECGI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECGI Holdings 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 ECGI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECGI Holdings has no effect on the direction of Granite Construction i.e., Granite Construction and ECGI Holdings go up and down completely randomly.
Pair Corralation between Granite Construction and ECGI Holdings
Considering the 90-day investment horizon Granite Construction is expected to generate 4.93 times less return on investment than ECGI Holdings. But when comparing it to its historical volatility, Granite Construction Incorporated is 11.84 times less risky than ECGI Holdings. It trades about 0.15 of its potential returns per unit of risk. ECGI Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1.98 in ECGI Holdings on September 1, 2024 and sell it today you would lose (1.87) from holding ECGI Holdings or give up 94.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction Incorpora vs. ECGI Holdings
Performance |
| Timeline |
| Granite Construction |
| ECGI Holdings |
Granite Construction and ECGI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and ECGI Holdings
The main advantage of trading using opposite Granite Construction and ECGI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, ECGI Holdings 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 ECGI Holdings will offset losses from the drop in ECGI Holdings' long position.| Granite Construction vs. EMCOR Group | Granite Construction vs. Comfort Systems USA | Granite Construction vs. Primoris Services | Granite Construction vs. Construction Partners |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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