Correlation Between Automatic Data and Granite Construction

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

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

Diversification Opportunities for Automatic Data and Granite Construction

-0.2

Correlation Coefficient

Automatic Data  Granite Construction

Good diversification

The 3 months correlation between Automatic and Granite is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Granite Construction go up and down completely randomly.

Pair Corralation between Automatic Data and Granite Construction

Assuming the 90 days horizon Automatic Data is expected to generate 5.34 times less return on investment than Granite Construction. But when comparing it to its historical volatility, Automatic Data Processing is 1.01 times less risky than Granite Construction. It trades about 0.02 of its potential returns per unit of risk. Granite Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,140  in Granite Construction on May 5, 2025 and sell it today you would earn a total of  760.00  from holding Granite Construction or generate 10.64% return on investment over 90 days.

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

Automatic Data Processing  vs.  Granite Construction

Automatic Data Processing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Granite Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Granite Construction may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Automatic Data and Granite Construction

The main advantage of trading using opposite Automatic Data and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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 Automatic Data Processing 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.