Correlation Between Equifax and Granite Construction

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

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

Diversification Opportunities for Equifax and Granite Construction

-0.7

Correlation Coefficient

Equifax  Granite Construction

Excellent diversification

The 3 months correlation between Equifax and Granite is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Equifax 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 Equifax 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 Equifax i.e., Equifax and Granite Construction go up and down completely randomly.

Pair Corralation between Equifax and Granite Construction

Assuming the 90 days horizon Equifax is expected to under-perform the Granite Construction. But the stock apears to be less risky and, when comparing its historical volatility, Equifax is 1.26 times less risky than Granite Construction. The stock trades about -0.02 of its potential returns per unit of risk. The Granite Construction is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,087  in Granite Construction on September 19, 2024 and sell it today you would earn a total of  1,613  from holding Granite Construction or generate 22.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Equifax  vs.  Granite Construction

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Equifax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 uncertain basic indicators, Granite Construction unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equifax and Granite Construction

The main advantage of trading using opposite Equifax and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equifax 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 Equifax 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.