Correlation Between Gates Industrial and Thermon Group
Can any of the company-specific risk be diversified away by investing in both Gates Industrial and Thermon 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 Gates Industrial and Thermon Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gates Industrial and Thermon Group Holdings, you can compare the effects of market volatilities on Gates Industrial and Thermon 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 Gates Industrial with a short position of Thermon Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gates Industrial and Thermon Group.
Diversification Opportunities for Gates Industrial and Thermon Group
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gates and Thermon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Thermon Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermon Group Holdings and Gates Industrial 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 Gates Industrial are associated (or correlated) with Thermon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermon Group Holdings has no effect on the direction of Gates Industrial i.e., Gates Industrial and Thermon Group go up and down completely randomly.
Pair Corralation between Gates Industrial and Thermon Group
Given the investment horizon of 90 days Gates Industrial is expected to generate 1.26 times less return on investment than Thermon Group. But when comparing it to its historical volatility, Gates Industrial is 1.6 times less risky than Thermon Group. It trades about 0.41 of its potential returns per unit of risk. Thermon Group Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,661 in Thermon Group Holdings on August 31, 2024 and sell it today you would earn a total of 495.00 from holding Thermon Group Holdings or generate 18.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gates Industrial vs. Thermon Group Holdings
Performance |
| Timeline |
| Gates Industrial |
| Thermon Group Holdings |
Gates Industrial and Thermon Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gates Industrial and Thermon Group
The main advantage of trading using opposite Gates Industrial and Thermon Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gates Industrial position performs unexpectedly, Thermon 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 Thermon Group will offset losses from the drop in Thermon Group's long position.| Gates Industrial vs. Crane NXT Co | Gates Industrial vs. Donaldson | Gates Industrial vs. ITT Inc | Gates Industrial vs. Franklin Electric Co |
| Thermon Group vs. Hurco Companies | Thermon Group vs. Enerpac Tool Group | Thermon Group vs. Enpro Industries | Thermon Group vs. Omega Flex |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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