Correlation Between Granite Construction and Raytheon Technologies

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

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

Diversification Opportunities for Granite Construction and Raytheon Technologies

0.23

Correlation Coefficient

Granite Construction  Raytheon Technologies

Modest diversification

The 3 months correlation between Granite and Raytheon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and Granite Construction 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 Granite Construction are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Granite Construction i.e., Granite Construction and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Granite Construction and Raytheon Technologies

Assuming the 90 days trading horizon Granite Construction is expected to generate 1.4 times more return on investment than Raytheon Technologies. However, Granite Construction is 1.4 times more volatile than Raytheon Technologies Corp. It trades about 0.1 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.04 per unit of risk. If you would invest  3,488  in Granite Construction on October 4, 2024 and sell it today you would earn a total of  4,949  from holding Granite Construction or generate 141.89% return on investment over 90 days.

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

Granite Construction  vs.  Raytheon Technologies Corp

Granite Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Granite Construction unveiled solid returns over the last few months and may actually be approaching a breakup point.

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Granite Construction and Raytheon Technologies

The main advantage of trading using opposite Granite Construction and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.

The idea behind Granite Construction and Raytheon Technologies Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.