Correlation Between NV5 Global and IES Holdings

Can any of the company-specific risk be diversified away by investing in both NV5 Global 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 NV5 Global and IES Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NV5 Global and IES Holdings, you can compare the effects of market volatilities on NV5 Global 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 NV5 Global with a short position of IES Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NV5 Global and IES Holdings.

Diversification Opportunities for NV5 Global and IES Holdings

0.3

Correlation Coefficient

NV5 Global  IES Holdings

Weak diversification

The 3 months correlation between NV5 and IES is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NV5 Global and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and NV5 Global 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 NV5 Global 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 NV5 Global i.e., NV5 Global and IES Holdings go up and down completely randomly.

Pair Corralation between NV5 Global and IES Holdings

Given the investment horizon of 90 days NV5 Global is expected to generate 0.35 times more return on investment than IES Holdings. However, NV5 Global is 2.88 times less risky than IES Holdings. It trades about 0.01 of its potential returns per unit of risk. IES Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,896  in NV5 Global on December 26, 2024 and sell it today you would earn a total of  10.00  from holding NV5 Global or generate 0.53% return on investment over 90 days.

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

NV5 Global  vs.  IES Holdings

NV5 Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NV5 Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, NV5 Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the 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 NV5 Global and IES Holdings

The main advantage of trading using opposite NV5 Global and IES Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NV5 Global 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 NV5 Global 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.