Correlation Between IES Holdings and Innovate Corp

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

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

Diversification Opportunities for IES Holdings and Innovate Corp

0.07

Correlation Coefficient

IES Holdings  Innovate Corp

Significant diversification

The 3 months correlation between IES and Innovate is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding IES Holdings and Innovate Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovate Corp 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 Innovate Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovate Corp has no effect on the direction of IES Holdings i.e., IES Holdings and Innovate Corp go up and down completely randomly.

Pair Corralation between IES Holdings and Innovate Corp

Given the investment horizon of 90 days IES Holdings is expected to under-perform the Innovate Corp. But the stock apears to be less risky and, when comparing its historical volatility, IES Holdings is 2.19 times less risky than Innovate Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Innovate Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  499.00  in Innovate Corp on December 28, 2024 and sell it today you would earn a total of  330.00  from holding Innovate Corp or generate 66.13% return on investment over 90 days.

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

IES Holdings  vs.  Innovate Corp

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.

Innovate Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovate Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Innovate Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IES Holdings and Innovate Corp

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

The idea behind IES Holdings and Innovate Corp 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .