Correlation Between IES Holdings and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both IES Holdings and Sterling 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 IES Holdings and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IES Holdings and Sterling Construction, you can compare the effects of market volatilities on IES Holdings and Sterling 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 IES Holdings with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of IES Holdings and Sterling Construction.
Diversification Opportunities for IES Holdings and Sterling Construction
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IES and Sterling is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding IES Holdings and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of IES Holdings i.e., IES Holdings and Sterling Construction go up and down completely randomly.
Pair Corralation between IES Holdings and Sterling Construction
Given the investment horizon of 90 days IES Holdings is expected to generate 0.97 times more return on investment than Sterling Construction. However, IES Holdings is 1.03 times less risky than Sterling Construction. It trades about 0.36 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.32 per unit of risk. If you would invest 21,131 in IES Holdings on August 28, 2024 and sell it today you would earn a total of 6,837 from holding IES Holdings or generate 32.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IES Holdings vs. Sterling Construction
Performance |
| Timeline |
| IES Holdings |
| Sterling Construction |
IES Holdings and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IES Holdings and Sterling Construction
The main advantage of trading using opposite IES Holdings and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IES Holdings position performs unexpectedly, Sterling 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| IES Holdings vs. EMCOR Group | IES Holdings vs. Comfort Systems USA | IES Holdings vs. Primoris Services | IES Holdings vs. Granite Construction Incorporated |
| Sterling Construction vs. EMCOR Group | Sterling Construction vs. Comfort Systems USA | Sterling Construction vs. Primoris Services | Sterling Construction vs. Granite Construction Incorporated |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |