Correlation Between Matrix Service and IES Holdings

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

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

Diversification Opportunities for Matrix Service and IES Holdings

0.61

Correlation Coefficient

Matrix Service  IES Holdings

Poor diversification

The 3 months correlation between Matrix and IES is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Matrix Service Co and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and Matrix Service 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 Matrix Service Co 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 Matrix Service i.e., Matrix Service and IES Holdings go up and down completely randomly.

Pair Corralation between Matrix Service and IES Holdings

Given the investment horizon of 90 days Matrix Service Co is expected to generate 0.57 times more return on investment than IES Holdings. However, Matrix Service Co is 1.75 times less risky than IES Holdings. It trades about 0.04 of its potential returns per unit of risk. IES Holdings is currently generating about -0.02 per unit of risk. If you would invest  1,203  in Matrix Service Co on December 28, 2024 and sell it today you would earn a total of  58.00  from holding Matrix Service Co or generate 4.82% return on investment over 90 days.

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

Matrix Service Co  vs.  IES Holdings

Matrix Service

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix Service Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Matrix Service may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Matrix Service and IES Holdings

The main advantage of trading using opposite Matrix Service and IES Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matrix Service 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 Matrix Service Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.