Correlation Between Ford and Granite Construction

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

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

Diversification Opportunities for Ford and Granite Construction

-0.26

Correlation Coefficient

Ford  Granite Construction

Very good diversification

The 3 months correlation between Ford and Granite is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Granite Construction Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Ford 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 Ford Motor 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 Ford i.e., Ford and Granite Construction go up and down completely randomly.

Pair Corralation between Ford and Granite Construction

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.09 times more return on investment than Granite Construction. However, Ford is 1.09 times more volatile than Granite Construction Incorporated. It trades about 0.05 of its potential returns per unit of risk. Granite Construction Incorporated is currently generating about -0.13 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  55.00  from holding Ford Motor or generate 5.64% return on investment over 90 days.

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

Ford Motor  vs.  Granite Construction Incorpora

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Granite Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Construction Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ford and Granite Construction

The main advantage of trading using opposite Ford and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Granite Construction Incorporated 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.