Correlation Between Construction Partners and Orion Group

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

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

Diversification Opportunities for Construction Partners and Orion Group

0.63

Correlation Coefficient

Construction Partners  Orion Group

Poor diversification

The 3 months correlation between Construction and Orion is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Construction Partners and Orion Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Group Holdings and Construction Partners 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 Construction Partners are associated (or correlated) with Orion Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Group Holdings has no effect on the direction of Construction Partners i.e., Construction Partners and Orion Group go up and down completely randomly.

Pair Corralation between Construction Partners and Orion Group

Given the investment horizon of 90 days Construction Partners is expected to generate 2.07 times less return on investment than Orion Group. But when comparing it to its historical volatility, Construction Partners is 1.56 times less risky than Orion Group. It trades about 0.33 of its potential returns per unit of risk. Orion Group Holdings is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  542.00  in Orion Group Holdings on August 31, 2024 and sell it today you would earn a total of  335.00  from holding Orion Group Holdings or generate 61.81% return on investment over 90 days.

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

Construction Partners  vs.  Orion Group Holdings

Construction Partners

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Construction Partners are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Construction Partners exhibited solid returns over the last few months and may actually be approaching a breakup point.

Orion Group Holdings

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Construction Partners and Orion Group

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

The idea behind Construction Partners and Orion Group 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 Anywhere module to track or share privately all of your investments from the convenience of any device.