Correlation Between Granite Construction and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on Granite Construction and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Sterling Construction.
Diversification Opportunities for Granite Construction and Sterling Construction
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Granite and Sterling is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Granite Construction i.e., Granite Construction and Sterling Construction go up and down completely randomly.
Pair Corralation between Granite Construction and Sterling Construction
Considering the 90-day investment horizon Granite Construction is expected to generate 1.41 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, Granite Construction Incorporated is 2.59 times less risky than Sterling Construction. It trades about 0.6 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 15,258 in Sterling Construction on August 28, 2024 and sell it today you would earn a total of 4,375 from holding Sterling Construction or generate 28.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction Incorpora vs. Sterling Construction
Performance |
| Timeline |
| Granite Construction |
| Sterling Construction |
Granite Construction and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and Sterling Construction
The main advantage of trading using opposite Granite Construction and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| Granite Construction vs. EMCOR Group | Granite Construction vs. Comfort Systems USA | Granite Construction vs. Primoris Services | Granite Construction vs. Construction Partners |
| Sterling Construction vs. EMCOR Group | Sterling Construction vs. Comfort Systems USA | Sterling Construction vs. Primoris Services | Sterling Construction vs. Granite Construction Incorporated |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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