Correlation Between Granite Construction and MasTec

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

Diversification Opportunities for Granite Construction and MasTec

0.94

Correlation Coefficient

Granite Construction  MasTec

Almost no diversification

The 3 months correlation between Granite and MasTec is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and MasTec Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasTec Inc 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 MasTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasTec Inc has no effect on the direction of Granite Construction i.e., Granite Construction and MasTec go up and down completely randomly.

Pair Corralation between Granite Construction and MasTec

Considering the 90-day investment horizon Granite Construction is expected to generate 1.08 times less return on investment than MasTec. But when comparing it to its historical volatility, Granite Construction Incorporated is 1.56 times less risky than MasTec. It trades about 0.37 of its potential returns per unit of risk. MasTec Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  10,436  in MasTec Inc on August 31, 2024 and sell it today you would earn a total of  4,019  from holding MasTec Inc or generate 38.51% 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.  MasTec Inc

Granite Construction

Risk-Adjusted Performance

29 of 100

Solid

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.

MasTec Inc

Risk-Adjusted Performance

20 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MasTec Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MasTec showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Construction and MasTec

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

The idea behind Granite Construction Incorporated and MasTec Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.