Correlation Between Dream Residential and Granite Real

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Can any of the company-specific risk be diversified away by investing in both Dream Residential and Granite Real 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 Dream Residential and Granite Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dream Residential Real and Granite Real Estate, you can compare the effects of market volatilities on Dream Residential and Granite Real 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 Dream Residential with a short position of Granite Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Residential and Granite Real.

Diversification Opportunities for Dream Residential and Granite Real

DreamGraniteDiversified AwayDreamGraniteDiversified Away100%
0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dream and Granite is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dream Residential Real and Granite Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Real Estate and Dream Residential 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 Dream Residential Real are associated (or correlated) with Granite Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Real Estate has no effect on the direction of Dream Residential i.e., Dream Residential and Granite Real go up and down completely randomly.

Pair Corralation between Dream Residential and Granite Real

Assuming the 90 days trading horizon Dream Residential Real is expected to generate 1.22 times more return on investment than Granite Real. However, Dream Residential is 1.22 times more volatile than Granite Real Estate. It trades about -0.01 of its potential returns per unit of risk. Granite Real Estate is currently generating about -0.06 per unit of risk. If you would invest  686.00  in Dream Residential Real on November 22, 2024 and sell it today you would lose (11.00) from holding Dream Residential Real or give up 1.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dream Residential Real  vs.  Granite Real Estate

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505
JavaScript chart by amCharts 3.21.15DRR-U GRT-UN
       Timeline  
Dream Residential Real 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Dream Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dream Residential is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6.26.46.66.877.27.4
Granite Real Estate 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Granite Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Granite Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6668707274

Dream Residential and Granite Real Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.62-4.21-2.8-1.390.01.412.824.235.64 0.050.100.150.20
JavaScript chart by amCharts 3.21.15DRR-U GRT-UN
       Returns  

Pair Trading with Dream Residential and Granite Real

The main advantage of trading using opposite Dream Residential and Granite Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Residential position performs unexpectedly, Granite Real 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 Real will offset losses from the drop in Granite Real's long position.
The idea behind Dream Residential Real and Granite Real Estate 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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