Correlation Between Granite Construction and Paramount Gold

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

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

Diversification Opportunities for Granite Construction and Paramount Gold

-0.34

Correlation Coefficient

Granite Construction  Paramount Gold

Very good diversification

The 3 months correlation between Granite and Paramount is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Paramount Gold Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Gold Nevada 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 Paramount Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Gold Nevada has no effect on the direction of Granite Construction i.e., Granite Construction and Paramount Gold go up and down completely randomly.

Pair Corralation between Granite Construction and Paramount Gold

Assuming the 90 days trading horizon Granite Construction is expected to under-perform the Paramount Gold. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction is 2.31 times less risky than Paramount Gold. The stock trades about -0.26 of its potential returns per unit of risk. The Paramount Gold Nevada is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Paramount Gold Nevada on October 7, 2024 and sell it today you would lose (2.00) from holding Paramount Gold Nevada or give up 5.71% of portfolio value over 90 days.

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

Granite Construction  vs.  Paramount Gold Nevada

Granite Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 11 (%) 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.

Paramount Gold Nevada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Gold Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Granite Construction and Paramount Gold

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

The idea behind Granite Construction and Paramount Gold Nevada 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.