Correlation Between Kadant and Thermon Group
Can any of the company-specific risk be diversified away by investing in both Kadant 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 Kadant and Thermon Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kadant Inc and Thermon Group Holdings, you can compare the effects of market volatilities on Kadant 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 Kadant with a short position of Thermon Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kadant and Thermon Group.
Diversification Opportunities for Kadant and Thermon Group
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kadant and Thermon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kadant Inc 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 Kadant 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 Kadant Inc 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 Kadant i.e., Kadant and Thermon Group go up and down completely randomly.
Pair Corralation between Kadant and Thermon Group
Considering the 90-day investment horizon Kadant Inc is expected to generate 1.0 times more return on investment than Thermon Group. However, Kadant Inc is 1.0 times less risky than Thermon Group. It trades about 0.43 of its potential returns per unit of risk. Thermon Group Holdings is currently generating about 0.37 per unit of risk. If you would invest 33,306 in Kadant Inc on September 1, 2024 and sell it today you would earn a total of 7,973 from holding Kadant Inc or generate 23.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kadant Inc vs. Thermon Group Holdings
Performance |
| Timeline |
| Kadant Inc |
| Thermon Group Holdings |
Kadant and Thermon Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kadant and Thermon Group
The main advantage of trading using opposite Kadant and Thermon Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kadant 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.The idea behind Kadant Inc and Thermon 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.| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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