Correlation Between Granite Construction and Dycom Industries

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

Diversification Opportunities for Granite Construction and Dycom Industries

0.89

Correlation Coefficient

Granite Construction  Dycom Industries

Very poor diversification

The 3 months correlation between Granite and Dycom is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries 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 Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of Granite Construction i.e., Granite Construction and Dycom Industries go up and down completely randomly.

Pair Corralation between Granite Construction and Dycom Industries

Considering the 90-day investment horizon Granite Construction Incorporated is expected to under-perform the Dycom Industries. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction Incorporated is 1.52 times less risky than Dycom Industries. The stock trades about -0.13 of its potential returns per unit of risk. The Dycom Industries is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  17,478  in Dycom Industries on December 28, 2024 and sell it today you would lose (2,064) from holding Dycom Industries or give up 11.81% of portfolio value over 90 days.

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

Granite Construction Incorpora  vs.  Dycom Industries

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.

Dycom Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dycom Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Granite Construction and Dycom Industries

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

The idea behind Granite Construction Incorporated and Dycom Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.