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

0.67

Correlation Coefficient

Kadant  Thermon Group

Poor diversification

The 3 months correlation between Kadant and Thermon is 0.67. 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 is expected to generate 6.76 times less return on investment than Thermon Group. In addition to that, Kadant is 1.02 times more volatile than Thermon Group Holdings. It trades about 0.02 of its total potential returns per unit of risk. Thermon Group Holdings is currently generating about 0.13 per unit of volatility. If you would invest  2,768  in Thermon Group Holdings on December 2, 2024 and sell it today you would earn a total of  182.00  from holding Thermon Group Holdings or generate 6.58% return on investment over 90 days.

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

Kadant Inc  vs.  Thermon Group Holdings

Kadant Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kadant Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Thermon Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermon Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.