Correlation Between Granite Construction and Energy Services

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

Diversification Opportunities for Granite Construction and Energy Services

0.93

Correlation Coefficient

Granite Construction  Energy Services

Almost no diversification

The 3 months correlation between Granite and Energy is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services 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 Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Granite Construction i.e., Granite Construction and Energy Services go up and down completely randomly.

Pair Corralation between Granite Construction and Energy Services

Considering the 90-day investment horizon Granite Construction is expected to generate 2.17 times less return on investment than Energy Services. But when comparing it to its historical volatility, Granite Construction Incorporated is 2.76 times less risky than Energy Services. It trades about 0.12 of its potential returns per unit of risk. Energy Services is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  246.00  in Energy Services on September 3, 2024 and sell it today you would earn a total of  1,180  from holding Energy Services or generate 479.67% return on investment over 90 days.

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

Granite Construction Incorpora  vs.  Energy Services

Granite Construction

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction Incorporated are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Granite Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Energy Services

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Services are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Energy Services sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Construction and Energy Services

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

The idea behind Granite Construction Incorporated and Energy Services 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.