Correlation Between Granite Construction and DeVry Education

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

Diversification Opportunities for Granite Construction and DeVry Education

0.96

Correlation Coefficient

Granite Construction  DeVry Education

Almost no diversification

The 3 months correlation between Granite and DeVry is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction and DeVry Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeVry 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 DeVry Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeVry Education Group has no effect on the direction of Granite Construction i.e., Granite Construction and DeVry Education go up and down completely randomly.

Pair Corralation between Granite Construction and DeVry Education

Assuming the 90 days trading horizon Granite Construction is expected to generate 0.72 times more return on investment than DeVry Education. However, Granite Construction is 1.39 times less risky than DeVry Education. It trades about 0.14 of its potential returns per unit of risk. DeVry Education Group is currently generating about 0.08 per unit of risk. If you would invest  4,589  in Granite Construction on September 24, 2024 and sell it today you would earn a total of  4,061  from holding Granite Construction or generate 88.49% 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  vs.  DeVry 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.

DeVry Education Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Construction and DeVry Education

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

The idea behind Granite Construction and DeVry 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 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.