Correlation Between Granite Construction and Natural Health

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

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

Diversification Opportunities for Granite Construction and Natural Health

-0.23

Correlation Coefficient

Granite Construction  Natural Health

Very good diversification

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

Pair Corralation between Granite Construction and Natural Health

Assuming the 90 days trading horizon Granite Construction is expected to generate 0.72 times more return on investment than Natural Health. However, Granite Construction is 1.38 times less risky than Natural Health. It trades about 0.26 of its potential returns per unit of risk. Natural Health Trends is currently generating about -0.14 per unit of risk. If you would invest  6,638  in Granite Construction on September 12, 2024 and sell it today you would earn a total of  2,462  from holding Granite Construction or generate 37.09% 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.  Natural Health Trends

Granite Construction

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 20 (%) 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.

Natural Health Trends

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Granite Construction and Natural Health

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

The idea behind Granite Construction and Natural Health Trends 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.