Correlation Between Great Lakes and IES Holdings

Can any of the company-specific risk be diversified away by investing in both Great Lakes 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 Great Lakes and IES Holdings 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 IES Holdings, you can compare the effects of market volatilities on Great Lakes 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 Great Lakes with a short position of IES Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and IES Holdings.

Diversification Opportunities for Great Lakes and IES Holdings

0.82

Correlation Coefficient

Great Lakes  IES Holdings

Very poor diversification

The 3 months correlation between Great and IES is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings 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 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 Great Lakes i.e., Great Lakes and IES Holdings go up and down completely randomly.

Pair Corralation between Great Lakes and IES Holdings

Given the investment horizon of 90 days Great Lakes Dredge is expected to under-perform the IES Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Great Lakes Dredge is 1.52 times less risky than IES Holdings. The stock trades about -0.09 of its potential returns per unit of risk. The IES Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  21,052  in IES Holdings on December 27, 2024 and sell it today you would lose (3,165) from holding IES Holdings or give up 15.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Great Lakes Dredge  vs.  IES Holdings

Great Lakes Dredge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Lakes Dredge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Great Lakes and IES Holdings

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

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.