Correlation Between Granite Construction and Aecom Technology

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

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

Diversification Opportunities for Granite Construction and Aecom Technology

0.96

Correlation Coefficient

Granite Construction  Aecom Technology

Almost no diversification

The 3 months correlation between Granite and Aecom is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and Aecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecom Technology 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 Incorporated are associated (or correlated) with Aecom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecom Technology has no effect on the direction of Granite Construction i.e., Granite Construction and Aecom Technology go up and down completely randomly.

Pair Corralation between Granite Construction and Aecom Technology

Considering the 90-day investment horizon Granite Construction Incorporated is expected to generate 0.74 times more return on investment than Aecom Technology. However, Granite Construction Incorporated is 1.35 times less risky than Aecom Technology. It trades about -0.29 of its potential returns per unit of risk. Aecom Technology is currently generating about -0.25 per unit of risk. If you would invest  8,653  in Granite Construction Incorporated on December 5, 2024 and sell it today you would lose (696.00) from holding Granite Construction Incorporated or give up 8.04% of portfolio value over 90 days.

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

Granite Construction Incorpora  vs.  Aecom Technology

Granite Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Construction Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aecom Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aecom Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Granite Construction and Aecom Technology

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

The idea behind Granite Construction Incorporated and Aecom Technology 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.