Correlation Between Sterling Construction and IES Holdings
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and IES Holdings 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 Sterling Construction and IES Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and IES Holdings, you can compare the effects of market volatilities on Sterling Construction and IES Holdings 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 Sterling Construction with a short position of IES Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and IES Holdings.
Diversification Opportunities for Sterling Construction and IES Holdings
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sterling and IES is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and Sterling Construction 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 Sterling Construction are associated (or correlated) with IES Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IES Holdings has no effect on the direction of Sterling Construction i.e., Sterling Construction and IES Holdings go up and down completely randomly.
Pair Corralation between Sterling Construction and IES Holdings
Given the investment horizon of 90 days Sterling Construction is expected to under-perform the IES Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Sterling Construction is 1.23 times less risky than IES Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The IES Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 22,104 in IES Holdings on November 9, 2024 and sell it today you would earn a total of 2,106 from holding IES Holdings or generate 9.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. IES Holdings
Performance |
| Timeline |
| Sterling Construction |
| IES Holdings |
Sterling Construction and IES Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and IES Holdings
The main advantage of trading using opposite Sterling Construction and IES Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, IES Holdings 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 IES Holdings will offset losses from the drop in IES Holdings' long position.| Sterling Construction vs. EMCOR Group | Sterling Construction vs. Comfort Systems USA | Sterling Construction vs. Primoris Services | Sterling Construction vs. Granite Construction Incorporated |
| IES Holdings vs. EMCOR Group | IES Holdings vs. Comfort Systems USA | IES Holdings vs. Primoris Services | IES Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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