Correlation Between Granite Construction and Columbia Sportswear
Can any of the company-specific risk be diversified away by investing in both Granite Construction and Columbia Sportswear 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 Columbia Sportswear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Construction and Columbia Sportswear, you can compare the effects of market volatilities on Granite Construction and Columbia Sportswear 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 Columbia Sportswear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and Columbia Sportswear.
Diversification Opportunities for Granite Construction and Columbia Sportswear
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and Columbia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Granite Construction i.e., Granite Construction and Columbia Sportswear go up and down completely randomly.
Pair Corralation between Granite Construction and Columbia Sportswear
Assuming the 90 days trading horizon Granite Construction is expected to generate 1.24 times more return on investment than Columbia Sportswear. However, Granite Construction is 1.24 times more volatile than Columbia Sportswear. It trades about 0.14 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.11 per unit of risk. If you would invest 7,638 in Granite Construction on October 23, 2024 and sell it today you would earn a total of 1,262 from holding Granite Construction or generate 16.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Granite Construction vs. Columbia Sportswear
Performance |
Timeline |
Granite Construction |
Columbia Sportswear |
Granite Construction and Columbia Sportswear Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Granite Construction and Columbia Sportswear
The main advantage of trading using opposite Granite Construction and Columbia Sportswear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Construction position performs unexpectedly, Columbia Sportswear 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 Columbia Sportswear will offset losses from the drop in Columbia Sportswear's long position.Granite Construction vs. Canadian Utilities Limited | ||
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Check out your portfolio center.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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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