Correlation Between IES Holdings and Construction Partners

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

By analyzing existing cross correlation between IES Holdings and Construction Partners, you can compare the effects of market volatilities on IES Holdings and Construction Partners 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 Construction Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of IES Holdings and Construction Partners.

Diversification Opportunities for IES Holdings and Construction Partners

0.75

Correlation Coefficient

IES Holdings  Construction Partners

Poor diversification

The 3 months correlation between IES and Construction is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding IES Holdings and Construction Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction Partners 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 Construction Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction Partners has no effect on the direction of IES Holdings i.e., IES Holdings and Construction Partners go up and down completely randomly.

Pair Corralation between IES Holdings and Construction Partners

Given the investment horizon of 90 days IES Holdings is expected to generate 1.7 times more return on investment than Construction Partners. However, IES Holdings is 1.7 times more volatile than Construction Partners. It trades about -0.03 of its potential returns per unit of risk. Construction Partners is currently generating about -0.1 per unit of risk. If you would invest  20,338  in IES Holdings on December 30, 2024 and sell it today you would lose (3,671) from holding IES Holdings or give up 18.05% of portfolio value over 90 days.

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

IES Holdings  vs.  Construction Partners

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.

Construction Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Construction Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic 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.

Pair Trading with IES Holdings and Construction Partners

The main advantage of trading using opposite IES Holdings and Construction Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IES Holdings position performs unexpectedly, Construction Partners 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 Construction Partners will offset losses from the drop in Construction Partners' long position.

The idea behind IES Holdings and Construction Partners 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.