Correlation Between Fluor and Granite Construction

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

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

Diversification Opportunities for Fluor and Granite Construction

0.32

Correlation Coefficient

Fluor  Granite Construction

Weak diversification

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

Pair Corralation between Fluor and Granite Construction

Considering the 90-day investment horizon Fluor is expected to under-perform the Granite Construction. In addition to that, Fluor is 1.92 times more volatile than Granite Construction Incorporated. It trades about -0.02 of its total potential returns per unit of risk. Granite Construction Incorporated is currently generating about 0.14 per unit of volatility. If you would invest  8,264  in Granite Construction Incorporated on October 22, 2024 and sell it today you would earn a total of  973.00  from holding Granite Construction Incorporated or generate 11.77% return on investment over 90 days.

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

Fluor  vs.  Granite Construction Incorpora

Fluor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fluor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Fluor is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Granite Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Granite Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fluor and Granite Construction

The main advantage of trading using opposite Fluor and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluor 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 Fluor 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.