Correlation Between Alstria Office and Granite Construction

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

By analyzing existing cross correlation between alstria office REIT AG and Granite Construction, you can compare the effects of market volatilities on Alstria Office and Granite Construction 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 Alstria Office with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alstria Office and Granite Construction.

Diversification Opportunities for Alstria Office and Granite Construction

0.85

Correlation Coefficient

Alstria Office  Granite Construction

Very poor diversification

The 3 months correlation between Alstria and Granite is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding alstria office REIT AG and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Alstria Office 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 alstria office REIT AG are associated (or correlated) with Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of Alstria Office i.e., Alstria Office and Granite Construction go up and down completely randomly.

Pair Corralation between Alstria Office and Granite Construction

Assuming the 90 days horizon alstria office REIT AG is expected to generate 0.85 times more return on investment than Granite Construction. However, alstria office REIT AG is 1.17 times less risky than Granite Construction. It trades about 0.26 of its potential returns per unit of risk. Granite Construction is currently generating about 0.17 per unit of risk. If you would invest  572.00  in alstria office REIT AG on September 24, 2024 and sell it today you would earn a total of  188.00  from holding alstria office REIT AG or generate 32.87% return on investment over 90 days.

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

alstria office REIT AG  vs.  Granite Construction

alstria office REIT

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in alstria office REIT AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alstria Office reported solid returns over the last few months and may actually be approaching a breakup point.

Granite Construction

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Granite Construction unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alstria Office and Granite Construction

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

The idea behind alstria office REIT AG and Granite Construction 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.