Correlation Between Badger Infrastructure and IES Holdings

Can any of the company-specific risk be diversified away by investing in both Badger Infrastructure 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 Badger Infrastructure and IES Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Badger Infrastructure Solutions and IES Holdings, you can compare the effects of market volatilities on Badger Infrastructure 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 Badger Infrastructure with a short position of IES Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Badger Infrastructure and IES Holdings.

Diversification Opportunities for Badger Infrastructure and IES Holdings

-0.48

Correlation Coefficient

Badger Infrastructure  IES Holdings

Very good diversification

The 3 months correlation between Badger and IES is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Badger Infrastructure Solution and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and Badger Infrastructure 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 Badger Infrastructure Solutions 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 Badger Infrastructure i.e., Badger Infrastructure and IES Holdings go up and down completely randomly.

Pair Corralation between Badger Infrastructure and IES Holdings

Assuming the 90 days horizon Badger Infrastructure Solutions is expected to generate 0.36 times more return on investment than IES Holdings. However, Badger Infrastructure Solutions is 2.76 times less risky than IES Holdings. It trades about 0.13 of its potential returns per unit of risk. IES Holdings is currently generating about -0.02 per unit of risk. If you would invest  2,469  in Badger Infrastructure Solutions on December 27, 2024 and sell it today you would earn a total of  338.00  from holding Badger Infrastructure Solutions or generate 13.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Badger Infrastructure Solution  vs.  IES Holdings

Badger Infrastructure

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Infrastructure Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Badger Infrastructure reported solid returns over the last few months and may actually be approaching a breakup point.

IES Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days IES Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Badger Infrastructure and IES Holdings

The main advantage of trading using opposite Badger Infrastructure and IES Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Badger Infrastructure 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.

The idea behind Badger Infrastructure Solutions and IES Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.