Correlation Between Carnegie Clean and Granite Construction

Can any of the company-specific risk be diversified away by investing in both Carnegie Clean 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 Carnegie Clean and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carnegie Clean Energy and Granite Construction, you can compare the effects of market volatilities on Carnegie Clean 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 Carnegie Clean with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnegie Clean and Granite Construction.

Diversification Opportunities for Carnegie Clean and Granite Construction

0.32

Correlation Coefficient

Carnegie Clean  Granite Construction

Weak diversification

The 3 months correlation between Carnegie and Granite is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Carnegie Clean 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 Carnegie Clean Energy 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 Carnegie Clean i.e., Carnegie Clean and Granite Construction go up and down completely randomly.

Pair Corralation between Carnegie Clean and Granite Construction

Assuming the 90 days trading horizon Carnegie Clean Energy is expected to generate 2.68 times more return on investment than Granite Construction. However, Carnegie Clean is 2.68 times more volatile than Granite Construction. It trades about -0.02 of its potential returns per unit of risk. Granite Construction is currently generating about -0.17 per unit of risk. If you would invest  2.18  in Carnegie Clean Energy on December 23, 2024 and sell it today you would lose (0.30) from holding Carnegie Clean Energy or give up 13.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Carnegie Clean Energy  vs.  Granite Construction

Carnegie Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carnegie Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Granite Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Carnegie Clean and Granite Construction

The main advantage of trading using opposite Carnegie Clean and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean 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.

The idea behind Carnegie Clean Energy and Granite Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.