Correlation Between Ranger Energy and Thermon Group

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

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

Diversification Opportunities for Ranger Energy and Thermon Group

0.69

Correlation Coefficient

Ranger Energy  Thermon Group

Poor diversification

The 3 months correlation between Ranger and Thermon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ranger Energy Services 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 Ranger Energy 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 Ranger Energy Services 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 Ranger Energy i.e., Ranger Energy and Thermon Group go up and down completely randomly.

Pair Corralation between Ranger Energy and Thermon Group

Given the investment horizon of 90 days Ranger Energy Services is expected to under-perform the Thermon Group. In addition to that, Ranger Energy is 1.49 times more volatile than Thermon Group Holdings. It trades about -0.3 of its total potential returns per unit of risk. Thermon Group Holdings is currently generating about -0.42 per unit of volatility. If you would invest  3,224  in Thermon Group Holdings on September 26, 2024 and sell it today you would lose (362.00) from holding Thermon Group Holdings or give up 11.23% of portfolio value over 90 days.

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

Ranger Energy Services  vs.  Thermon Group Holdings

Ranger Energy Services

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, Ranger Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Thermon Group Holdings

Risk-Adjusted Performance

0 of 100

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 Ranger Energy and Thermon Group

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

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.