Correlation Between Granite Construction and China Xuefeng
Can any of the company-specific risk be diversified away by investing in both Granite Construction and China Xuefeng 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 China Xuefeng 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 China Xuefeng Environmental, you can compare the effects of market volatilities on Granite Construction and China Xuefeng 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 China Xuefeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and China Xuefeng.
Diversification Opportunities for Granite Construction and China Xuefeng
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Granite and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and China Xuefeng Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Xuefeng Enviro 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 China Xuefeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Xuefeng Enviro has no effect on the direction of Granite Construction i.e., Granite Construction and China Xuefeng go up and down completely randomly.
Pair Corralation between Granite Construction and China Xuefeng
Considering the 90-day investment horizon Granite Construction is expected to generate 6.53 times less return on investment than China Xuefeng. But when comparing it to its historical volatility, Granite Construction Incorporated is 17.39 times less risky than China Xuefeng. It trades about 0.26 of its potential returns per unit of risk. China Xuefeng Environmental is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3.00 in China Xuefeng Environmental on August 25, 2024 and sell it today you would lose (1.00) from holding China Xuefeng Environmental or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction Incorpora vs. China Xuefeng Environmental
Performance |
| Timeline |
| Granite Construction |
| China Xuefeng Enviro |
Granite Construction and China Xuefeng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and China Xuefeng
The main advantage of trading using opposite Granite Construction and China Xuefeng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, China Xuefeng 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 China Xuefeng will offset losses from the drop in China Xuefeng's long position.| Granite Construction vs. EMCOR Group | Granite Construction vs. Comfort Systems USA | Granite Construction vs. Primoris Services | Granite Construction vs. Construction Partners |
| China Xuefeng vs. Isuzu Motors | China Xuefeng vs. Renault SA | China Xuefeng vs. Mazda Motor Corp | China Xuefeng vs. Bayerische Motoren Werke |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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