Correlation Between Granite Construction and IES Holdings

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

Diversification Opportunities for Granite Construction and IES Holdings

0.83

Correlation Coefficient

Granite Construction  IES Holdings

Very poor diversification

The 3 months correlation between Granite and IES is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Granite Construction Incorpora and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and Granite 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 Granite Construction Incorporated 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 Granite Construction i.e., Granite Construction and IES Holdings go up and down completely randomly.

Pair Corralation between Granite Construction and IES Holdings

Considering the 90-day investment horizon Granite Construction Incorporated is expected to under-perform the IES Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Granite Construction Incorporated is 3.02 times less risky than IES Holdings. The stock trades about -0.13 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  20,338  in IES Holdings on December 28, 2024 and sell it today you would lose (3,274) from holding IES Holdings or give up 16.1% of portfolio value over 90 days.

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

Granite Construction Incorpora  vs.  IES Holdings

Granite Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Construction Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Granite Construction and IES Holdings

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

The idea behind Granite Construction Incorporated 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.