Correlation Between Granite Construction and CHINA EDUCATION

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

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

Diversification Opportunities for Granite Construction and CHINA EDUCATION

-0.78

Correlation Coefficient

Granite Construction  CHINA EDUCATION

Pay attention - limited upside

The 3 months correlation between Granite and CHINA is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP 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 are associated (or correlated) with CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of Granite Construction i.e., Granite Construction and CHINA EDUCATION go up and down completely randomly.

Pair Corralation between Granite Construction and CHINA EDUCATION

Assuming the 90 days trading horizon Granite Construction is expected to generate 1.16 times less return on investment than CHINA EDUCATION. But when comparing it to its historical volatility, Granite Construction is 2.69 times less risky than CHINA EDUCATION. It trades about 0.14 of its potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  25.00  in CHINA EDUCATION GROUP on September 24, 2024 and sell it today you would earn a total of  16.00  from holding CHINA EDUCATION GROUP or generate 64.0% return on investment over 90 days.

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

Granite Construction  vs.  CHINA EDUCATION GROUP

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.

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Granite Construction and CHINA EDUCATION

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

The idea behind Granite Construction and CHINA EDUCATION GROUP 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.