Correlation Between CSW Industrials and Thermon Group

Can any of the company-specific risk be diversified away by investing in both CSW Industrials 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 CSW Industrials and Thermon Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CSW Industrials and Thermon Group

0.18

Correlation Coefficient

CSW Industrials  Thermon Group

Average diversification

The 3 months correlation between CSW and Thermon is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CSW Industrials 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 CSW Industrials 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 CSW Industrials 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 CSW Industrials i.e., CSW Industrials and Thermon Group go up and down completely randomly.

Pair Corralation between CSW Industrials and Thermon Group

Given the investment horizon of 90 days CSW Industrials is expected to under-perform the Thermon Group. But the stock apears to be less risky and, when comparing its historical volatility, CSW Industrials is 1.13 times less risky than Thermon Group. The stock trades about -0.15 of its potential returns per unit of risk. The Thermon Group Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,885  in Thermon Group Holdings on December 24, 2024 and sell it today you would earn a total of  161.00  from holding Thermon Group Holdings or generate 5.58% return on investment over 90 days.

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

CSW Industrials  vs.  Thermon Group Holdings

CSW Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSW Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Thermon Group Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thermon Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical indicators, Thermon Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CSW Industrials and Thermon Group

The main advantage of trading using opposite CSW Industrials and Thermon Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSW Industrials 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 CSW Industrials 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.