Correlation Between Granite Construction and Rackla Metals
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Rackla Metals 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 Rackla Metals 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 Rackla Metals, you can compare the effects of market volatilities on Granite Construction and Rackla Metals 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 Rackla Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Rackla Metals.
Diversification Opportunities for Granite Construction and Rackla Metals
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and Rackla is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals 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 Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of Granite Construction i.e., Granite Construction and Rackla Metals go up and down completely randomly.
Pair Corralation between Granite Construction and Rackla Metals
Considering the 90-day investment horizon Granite Construction is expected to generate 1.99 times less return on investment than Rackla Metals. But when comparing it to its historical volatility, Granite Construction Incorporated is 7.38 times less risky than Rackla Metals. It trades about 0.55 of its potential returns per unit of risk. Rackla Metals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5.30 in Rackla Metals on August 29, 2024 and sell it today you would earn a total of 1.50 from holding Rackla Metals or generate 28.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Granite Construction Incorpora vs. Rackla Metals
Performance |
| Timeline |
| Granite Construction |
| Rackla Metals |
Granite Construction and Rackla Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Rackla Metals
The main advantage of trading using opposite Granite Construction and Rackla Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Rackla Metals 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 Rackla Metals will offset losses from the drop in Rackla Metals' long position.| Granite Construction vs. EMCOR Group | Granite Construction vs. Comfort Systems USA | Granite Construction vs. Primoris Services | Granite Construction vs. Construction Partners |
| Rackla Metals vs. TRU Precious Metals | Rackla Metals vs. North Peak Resources | Rackla Metals vs. Augusta Gold Corp | Rackla Metals vs. Nine Mile Metals |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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