Correlation Between Granite Construction and West Japan
Can any of the company-specific risk be diversified away by investing in both Granite Construction and West Japan 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 West Japan 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 West Japan Railway, you can compare the effects of market volatilities on Granite Construction and West Japan 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 West Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and West Japan.
Diversification Opportunities for Granite Construction and West Japan
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Granite and West is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and West Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Japan Railway 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 West Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Japan Railway has no effect on the direction of Granite Construction i.e., Granite Construction and West Japan go up and down completely randomly.
Pair Corralation between Granite Construction and West Japan
Considering the 90-day investment horizon Granite Construction Incorporated is expected to generate 0.91 times more return on investment than West Japan. However, Granite Construction Incorporated is 1.1 times less risky than West Japan. It trades about 0.26 of its potential returns per unit of risk. West Japan Railway is currently generating about -0.03 per unit of risk. If you would invest 6,168 in Granite Construction Incorporated on August 28, 2024 and sell it today you would earn a total of 3,745 from holding Granite Construction Incorporated or generate 60.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Construction Incorpora vs. West Japan Railway
Performance |
| Timeline |
| Granite Construction |
| West Japan Railway |
Granite Construction and West Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Construction and West Japan
The main advantage of trading using opposite Granite Construction and West Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, West Japan 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 West Japan will offset losses from the drop in West Japan's long position.| Granite Construction vs. Innovate Corp | Granite Construction vs. Energy Services | Granite Construction vs. Topbuild Corp |
| West Japan vs. Central Japan Railway | West Japan vs. LB Foster | West Japan vs. East Japan Railway | West Japan vs. Greenbrier Companies |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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