Correlation Between Granite Construction and CIFI Holdings

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

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

Diversification Opportunities for Granite Construction and CIFI Holdings

-0.37

Correlation Coefficient

Granite Construction  CIFI Holdings

Very good diversification

The 3 months correlation between Granite and CIFI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and CIFI Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIFI Holdings 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 CIFI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIFI Holdings has no effect on the direction of Granite Construction i.e., Granite Construction and CIFI Holdings go up and down completely randomly.

Pair Corralation between Granite Construction and CIFI Holdings

Assuming the 90 days trading horizon Granite Construction is expected to under-perform the CIFI Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction is 4.61 times less risky than CIFI Holdings. The stock trades about -0.36 of its potential returns per unit of risk. The CIFI Holdings Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.90  in CIFI Holdings Co on September 26, 2024 and sell it today you would earn a total of  0.25  from holding CIFI Holdings Co or generate 8.62% return on investment over 90 days.

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

Granite Construction  vs.  CIFI Holdings Co

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.

CIFI Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CIFI Holdings Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CIFI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Construction and CIFI Holdings

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

The idea behind Granite Construction and CIFI Holdings Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.