Correlation Between Granite Construction and Bio Techne

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

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

Diversification Opportunities for Granite Construction and Bio Techne

0.08

Correlation Coefficient

Granite Construction  Bio Techne

Significant diversification

The 3 months correlation between Granite and Bio is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and Bio Techne Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Techne Corp 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 Bio Techne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Techne Corp has no effect on the direction of Granite Construction i.e., Granite Construction and Bio Techne go up and down completely randomly.

Pair Corralation between Granite Construction and Bio Techne

Assuming the 90 days trading horizon Granite Construction is expected to generate 1.89 times less return on investment than Bio Techne. But when comparing it to its historical volatility, Granite Construction is 1.23 times less risky than Bio Techne. It trades about 0.11 of its potential returns per unit of risk. Bio Techne Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,950  in Bio Techne Corp on October 26, 2024 and sell it today you would earn a total of  350.00  from holding Bio Techne Corp or generate 5.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Granite Construction  vs.  Bio Techne Corp

Granite Construction

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 10 (%) 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.

Bio Techne Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Techne Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Bio Techne unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Construction and Bio Techne

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

The idea behind Granite Construction and Bio Techne Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.