Correlation Between DAIRY FARM and Granite Construction

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

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

Diversification Opportunities for DAIRY FARM and Granite Construction

0.63

Correlation Coefficient

DAIRY FARM  Granite Construction

Poor diversification

The 3 months correlation between DAIRY and Granite is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Granite Construction go up and down completely randomly.

Pair Corralation between DAIRY FARM and Granite Construction

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 1.64 times more return on investment than Granite Construction. However, DAIRY FARM is 1.64 times more volatile than Granite Construction. It trades about 0.17 of its potential returns per unit of risk. Granite Construction is currently generating about 0.11 per unit of risk. If you would invest  236.00  in DAIRY FARM INTL on May 6, 2025 and sell it today you would earn a total of  60.00  from holding DAIRY FARM INTL or generate 25.42% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  Granite Construction

DAIRY FARM INTL

Risk-Adjusted Performance

Good

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

Granite Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Granite Construction may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with DAIRY FARM and Granite Construction

The main advantage of trading using opposite DAIRY FARM and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.