Correlation Between Delek Automotive and IES Holdings

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

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

Diversification Opportunities for Delek Automotive and IES Holdings

0.92

Correlation Coefficient

Delek Automotive  IES Holdings

Almost no diversification

The 3 months correlation between Delek and IES is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Delek Automotive Systems and IES Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IES Holdings and Delek Automotive 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 Delek Automotive Systems 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 Delek Automotive i.e., Delek Automotive and IES Holdings go up and down completely randomly.

Pair Corralation between Delek Automotive and IES Holdings

Assuming the 90 days trading horizon Delek Automotive Systems is expected to generate 1.21 times more return on investment than IES Holdings. However, Delek Automotive is 1.21 times more volatile than IES Holdings. It trades about 0.3 of its potential returns per unit of risk. IES Holdings is currently generating about 0.26 per unit of risk. If you would invest  214,400  in Delek Automotive Systems on September 29, 2024 and sell it today you would earn a total of  74,100  from holding Delek Automotive Systems or generate 34.56% return on investment over 90 days.

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

Delek Automotive Systems  vs.  IES Holdings

Delek Automotive Systems

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Automotive Systems are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Delek Automotive sustained solid returns over the last few months and may actually be approaching a breakup point.

IES Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IES Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IES Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delek Automotive and IES Holdings

The main advantage of trading using opposite Delek Automotive and IES Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Automotive 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 Delek Automotive Systems 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.