Correlation Between DOCDATA and Granite Construction

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

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

Diversification Opportunities for DOCDATA and Granite Construction

-0.83

Correlation Coefficient

DOCDATA  Granite Construction

Pay attention - limited upside

The 3 months correlation between DOCDATA and Granite is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding DOCDATA and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and DOCDATA 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 DOCDATA 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 DOCDATA i.e., DOCDATA and Granite Construction go up and down completely randomly.

Pair Corralation between DOCDATA and Granite Construction

Assuming the 90 days trading horizon DOCDATA is expected to under-perform the Granite Construction. In addition to that, DOCDATA is 2.29 times more volatile than Granite Construction. It trades about -0.01 of its total potential returns per unit of risk. Granite Construction is currently generating about 0.16 per unit of volatility. If you would invest  4,081  in Granite Construction on September 23, 2024 and sell it today you would earn a total of  4,569  from holding Granite Construction or generate 111.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

DOCDATA  vs.  Granite Construction

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Granite Construction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Granite Construction unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DOCDATA and Granite Construction

The main advantage of trading using opposite DOCDATA and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOCDATA 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 DOCDATA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.