Correlation Between Great Lakes and Dycom Industries
Can any of the company-specific risk be diversified away by investing in both Great Lakes and Dycom Industries 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 Great Lakes and Dycom Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Lakes Dredge and Dycom Industries, you can compare the effects of market volatilities on Great Lakes and Dycom Industries 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 Great Lakes with a short position of Dycom Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and Dycom Industries.
Diversification Opportunities for Great Lakes and Dycom Industries
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Great and Dycom is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries and Great Lakes 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 Great Lakes Dredge are associated (or correlated) with Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of Great Lakes i.e., Great Lakes and Dycom Industries go up and down completely randomly.
Pair Corralation between Great Lakes and Dycom Industries
Given the investment horizon of 90 days Great Lakes Dredge is expected to under-perform the Dycom Industries. In addition to that, Great Lakes is 1.13 times more volatile than Dycom Industries. It trades about -0.53 of its total potential returns per unit of risk. Dycom Industries is currently generating about -0.14 per unit of volatility. If you would invest 14,127 in Dycom Industries on January 20, 2024 and sell it today you would lose (571.00) from holding Dycom Industries or give up 4.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Great Lakes Dredge vs. Dycom Industries
Performance |
| Timeline |
| Great Lakes Dredge |
| Dycom Industries |
Great Lakes and Dycom Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Lakes and Dycom Industries
The main advantage of trading using opposite Great Lakes and Dycom Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes position performs unexpectedly, Dycom Industries 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 Dycom Industries will offset losses from the drop in Dycom Industries' long position.The idea behind Great Lakes Dredge and Dycom Industries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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