Correlation Between Limoneira and Thermon Group

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

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

Diversification Opportunities for Limoneira and Thermon Group

0.73

Correlation Coefficient

Limoneira  Thermon Group

Poor diversification

The 3 months correlation between Limoneira and Thermon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Limoneira Co 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 Limoneira 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 Limoneira Co 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 Limoneira i.e., Limoneira and Thermon Group go up and down completely randomly.

Pair Corralation between Limoneira and Thermon Group

Given the investment horizon of 90 days Limoneira Co is expected to generate 0.97 times more return on investment than Thermon Group. However, Limoneira Co is 1.03 times less risky than Thermon Group. It trades about 0.05 of its potential returns per unit of risk. Thermon Group Holdings is currently generating about 0.02 per unit of risk. If you would invest  1,518  in Limoneira Co on November 20, 2024 and sell it today you would earn a total of  789.00  from holding Limoneira Co or generate 51.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Limoneira Co  vs.  Thermon Group Holdings

Limoneira

Risk-Adjusted Performance

Very Weak

Over the last 90 days Limoneira Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 relatively invariable technical indicators, Thermon Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Limoneira and Thermon Group

The main advantage of trading using opposite Limoneira and Thermon Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Limoneira 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 Limoneira Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.