Correlation Between Granite Construction and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Granite Construction and LOréal SA 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 LOréal SA 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 LOral SA, you can compare the effects of market volatilities on Granite Construction and LOréal SA 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and LOréal SA.
Diversification Opportunities for Granite Construction and LOréal SA
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Granite and LOréal is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Granite Construction i.e., Granite Construction and LOréal SA go up and down completely randomly.
Pair Corralation between Granite Construction and LOréal SA
Considering the 90-day investment horizon Granite Construction Incorporated is expected to generate 0.7 times more return on investment than LOréal SA. However, Granite Construction Incorporated is 1.43 times less risky than LOréal SA. It trades about 0.58 of its potential returns per unit of risk. LOral SA is currently generating about -0.28 per unit of risk. If you would invest 8,218 in Granite Construction Incorporated on August 28, 2024 and sell it today you would earn a total of 1,695 from holding Granite Construction Incorporated or generate 20.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction Incorpora vs. LOral SA
Performance |
| Timeline |
| Granite Construction |
| LOréal SA |
Granite Construction and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and LOréal SA
The main advantage of trading using opposite Granite Construction and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Granite Construction vs. Innovate Corp | Granite Construction vs. Energy Services | Granite Construction vs. Api Group Corp | Granite Construction vs. Topbuild Corp |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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