Correlation Between Thermon Group and Watts Water
Can any of the company-specific risk be diversified away by investing in both Thermon Group and Watts Water 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 Thermon Group and Watts Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thermon Group Holdings and Watts Water Technologies, you can compare the effects of market volatilities on Thermon Group and Watts Water 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 Thermon Group with a short position of Watts Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermon Group and Watts Water.
Diversification Opportunities for Thermon Group and Watts Water
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Thermon and Watts is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and Watts Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watts Water Technologies and Thermon Group 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 Thermon Group Holdings are associated (or correlated) with Watts Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watts Water Technologies has no effect on the direction of Thermon Group i.e., Thermon Group and Watts Water go up and down completely randomly.
Pair Corralation between Thermon Group and Watts Water
Considering the 90-day investment horizon Thermon Group Holdings is expected to generate 1.51 times more return on investment than Watts Water. However, Thermon Group is 1.51 times more volatile than Watts Water Technologies. It trades about 0.04 of its potential returns per unit of risk. Watts Water Technologies is currently generating about 0.05 per unit of risk. If you would invest 2,591 in Thermon Group Holdings on August 28, 2024 and sell it today you would earn a total of 633.00 from holding Thermon Group Holdings or generate 24.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thermon Group Holdings vs. Watts Water Technologies
Performance |
| Timeline |
| Thermon Group Holdings |
| Watts Water Technologies |
Thermon Group and Watts Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thermon Group and Watts Water
The main advantage of trading using opposite Thermon Group and Watts Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermon Group position performs unexpectedly, Watts Water 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 Watts Water will offset losses from the drop in Watts Water's long position.| Thermon Group vs. Graco Inc | Thermon Group vs. Franklin Electric Co | Thermon Group vs. Flowserve | Thermon Group vs. Donaldson |
| Watts Water vs. IDEX Corporation | Watts Water vs. Donaldson | Watts Water vs. Gorman Rupp | Watts Water vs. Enerpac Tool Group |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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