Correlation Between Matrix Service and Construction Partners

Can any of the company-specific risk be diversified away by investing in both Matrix Service and Construction Partners 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 Construction Partners 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 Construction Partners, you can compare the effects of market volatilities on Matrix Service and Construction Partners 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 Construction Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matrix Service and Construction Partners.

Diversification Opportunities for Matrix Service and Construction Partners

0.53

Correlation Coefficient

Matrix Service  Construction Partners

Very weak diversification

The 3 months correlation between Matrix and Construction is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Matrix Service Co and Construction Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction Partners 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 Construction Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction Partners has no effect on the direction of Matrix Service i.e., Matrix Service and Construction Partners go up and down completely randomly.

Pair Corralation between Matrix Service and Construction Partners

Given the investment horizon of 90 days Matrix Service Co is expected to under-perform the Construction Partners. But the stock apears to be less risky and, when comparing its historical volatility, Matrix Service Co is 1.0 times less risky than Construction Partners. The stock trades about -0.02 of its potential returns per unit of risk. The Construction Partners is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,712  in Construction Partners on January 10, 2025 and sell it today you would lose (800.00) from holding Construction Partners or give up 9.18% of portfolio value over 90 days.

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

Matrix Service Co  vs.  Construction Partners

Matrix Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matrix Service Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Matrix Service is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Construction Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Construction Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Construction Partners is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Matrix Service and Construction Partners

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

The idea behind Matrix Service Co and Construction Partners 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.