Correlation Between Granite Construction and United Therapeutics

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

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

Diversification Opportunities for Granite Construction and United Therapeutics

0.71

Correlation Coefficient

Granite Construction  United Therapeutics

Poor diversification

The 3 months correlation between Granite and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and United Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Therapeutics 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 United Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Therapeutics has no effect on the direction of Granite Construction i.e., Granite Construction and United Therapeutics go up and down completely randomly.

Pair Corralation between Granite Construction and United Therapeutics

Assuming the 90 days trading horizon Granite Construction is expected to under-perform the United Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction is 1.24 times less risky than United Therapeutics. The stock trades about -0.17 of its potential returns per unit of risk. The United Therapeutics is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  34,550  in United Therapeutics on December 23, 2024 and sell it today you would lose (5,570) from holding United Therapeutics or give up 16.12% of portfolio value over 90 days.

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

Granite Construction  vs.  United Therapeutics

Granite Construction

Risk-Adjusted Performance

Very Weak

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

United Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Granite Construction and United Therapeutics

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

The idea behind Granite Construction and United Therapeutics 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 Transaction History module to view history of all your transactions and understand their impact on performance.