Correlation Between IES Holdings and Construction Partners
Can any of the company-specific risk be diversified away by investing in both IES Holdings and Construction Partners 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 IES Holdings and Construction Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IES Holdings and Construction Partners, you can compare the effects of market volatilities on IES Holdings and Construction Partners 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 IES Holdings with a short position of Construction Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of IES Holdings and Construction Partners.
Diversification Opportunities for IES Holdings and Construction Partners
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IES and Construction is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding IES Holdings and Construction Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction Partners and IES Holdings 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 IES Holdings are associated (or correlated) with Construction Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction Partners has no effect on the direction of IES Holdings i.e., IES Holdings and Construction Partners go up and down completely randomly.
Pair Corralation between IES Holdings and Construction Partners
Given the investment horizon of 90 days IES Holdings is expected to generate 1.36 times more return on investment than Construction Partners. However, IES Holdings is 1.36 times more volatile than Construction Partners. It trades about 0.17 of its potential returns per unit of risk. Construction Partners is currently generating about 0.15 per unit of risk. If you would invest 8,196 in IES Holdings on August 28, 2024 and sell it today you would earn a total of 19,772 from holding IES Holdings or generate 241.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IES Holdings vs. Construction Partners
Performance |
| Timeline |
| IES Holdings |
| Construction Partners |
IES Holdings and Construction Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IES Holdings and Construction Partners
The main advantage of trading using opposite IES Holdings and Construction Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IES Holdings position performs unexpectedly, Construction Partners 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 Construction Partners will offset losses from the drop in Construction Partners' long position.| IES Holdings vs. EMCOR Group | IES Holdings vs. Comfort Systems USA | IES Holdings vs. Primoris Services | IES Holdings vs. Granite Construction Incorporated |
| Construction Partners vs. MYR Group | Construction Partners vs. Granite Construction Incorporated | Construction Partners vs. Tutor Perini | Construction Partners vs. Sterling Construction |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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