Correlation Between Reinsurance Group and Granite Construction
Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and Granite 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 Reinsurance Group and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reinsurance Group of and Granite Construction, you can compare the effects of market volatilities on Reinsurance Group and Granite 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 Reinsurance Group with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Granite Construction.
Diversification Opportunities for Reinsurance Group and Granite Construction
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reinsurance and Granite is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Granite Construction go up and down completely randomly.
Pair Corralation between Reinsurance Group and Granite Construction
Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 1.19 times more return on investment than Granite Construction. However, Reinsurance Group is 1.19 times more volatile than Granite Construction. It trades about 0.32 of its potential returns per unit of risk. Granite Construction is currently generating about 0.2 per unit of risk. If you would invest 19,800 in Reinsurance Group of on October 24, 2024 and sell it today you would earn a total of 1,600 from holding Reinsurance Group of or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reinsurance Group of vs. Granite Construction
Performance |
| Timeline |
| Reinsurance Group |
| Granite Construction |
Reinsurance Group and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reinsurance Group and Granite Construction
The main advantage of trading using opposite Reinsurance Group and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group position performs unexpectedly, Granite 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 Granite Construction will offset losses from the drop in Granite Construction's long position.| Reinsurance Group vs. Granite Construction | Reinsurance Group vs. North American Construction | Reinsurance Group vs. ALEFARM BREWING DK 05 | Reinsurance Group vs. Lendlease Group |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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