Correlation Between Granite Construction and AGCO

Can any of the company-specific risk be diversified away by investing in both Granite Construction and AGCO 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 AGCO 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 AGCO Corporation, you can compare the effects of market volatilities on Granite Construction and AGCO 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 AGCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Construction and AGCO.

Diversification Opportunities for Granite Construction and AGCO

0.17

Correlation Coefficient

Granite Construction  AGCO

Average diversification

The 3 months correlation between Granite and AGCO is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO 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 AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Granite Construction i.e., Granite Construction and AGCO go up and down completely randomly.

Pair Corralation between Granite Construction and AGCO

Considering the 90-day investment horizon Granite Construction Incorporated is expected to under-perform the AGCO. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction Incorporated is 1.4 times less risky than AGCO. The stock trades about -0.13 of its potential returns per unit of risk. The AGCO Corporation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,281  in AGCO Corporation on December 28, 2024 and sell it today you would earn a total of  605.00  from holding AGCO Corporation or generate 6.52% return on investment over 90 days.

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

Granite Construction Incorpora  vs.  AGCO Corp.

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.

AGCO

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, AGCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Granite Construction and AGCO

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

The idea behind Granite Construction Incorporated and AGCO Corporation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.