Correlation Between Granite Construction and KeyCorp

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

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

Diversification Opportunities for Granite Construction and KeyCorp

0.91

Correlation Coefficient

Granite Construction  KeyCorp

Almost no diversification

The 3 months correlation between Granite and KeyCorp is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Granite Construction i.e., Granite Construction and KeyCorp go up and down completely randomly.

Pair Corralation between Granite Construction and KeyCorp

Assuming the 90 days trading horizon Granite Construction is expected to generate 0.65 times more return on investment than KeyCorp. However, Granite Construction is 1.53 times less risky than KeyCorp. It trades about 0.22 of its potential returns per unit of risk. KeyCorp is currently generating about 0.06 per unit of risk. If you would invest  8,637  in Granite Construction on October 25, 2024 and sell it today you would earn a total of  413.00  from holding Granite Construction or generate 4.78% return on investment over 90 days.

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

Granite Construction  vs.  KeyCorp

Granite Construction

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 13 (%) 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.

KeyCorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Granite Construction and KeyCorp

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

The idea behind Granite Construction and KeyCorp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.