Correlation Between Sterling Construction and Granite Construction
Can any of the company-specific risk be diversified away by investing in both Sterling Construction 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 Sterling Construction and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Granite Construction Incorporated, you can compare the effects of market volatilities on Sterling Construction 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 Sterling Construction with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Granite Construction.
Diversification Opportunities for Sterling Construction and Granite Construction
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sterling and Granite is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Granite Construction Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Sterling 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Granite Construction go up and down completely randomly.
Pair Corralation between Sterling Construction and Granite Construction
Given the investment horizon of 90 days Sterling Construction is expected to generate 2.53 times more return on investment than Granite Construction. However, Sterling Construction is 2.53 times more volatile than Granite Construction Incorporated. It trades about 0.09 of its potential returns per unit of risk. Granite Construction Incorporated is currently generating about 0.1 per unit of risk. If you would invest 17,520 in Sterling Construction on October 21, 2024 and sell it today you would earn a total of 731.00 from holding Sterling Construction or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Granite Construction Incorpora
Performance |
| Timeline |
| Sterling Construction |
| Granite Construction |
Sterling Construction and Granite Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Granite Construction
The main advantage of trading using opposite Sterling Construction and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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.| Sterling Construction vs. EMCOR Group | Sterling Construction vs. Comfort Systems USA | Sterling Construction vs. Primoris Services | Sterling Construction vs. Granite Construction Incorporated |
| Granite Construction vs. EMCOR Group | Granite Construction vs. Comfort Systems USA | Granite Construction vs. Primoris Services | Granite Construction vs. Construction Partners |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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