Correlation Between Thermon Group and CSW Industrials

Can any of the company-specific risk be diversified away by investing in both Thermon Group and CSW Industrials 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 CSW Industrials 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 CSW Industrials, you can compare the effects of market volatilities on Thermon Group and CSW Industrials 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 CSW Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermon Group and CSW Industrials.

Diversification Opportunities for Thermon Group and CSW Industrials

0.18

Correlation Coefficient

Thermon Group  CSW Industrials

Average diversification

The 3 months correlation between Thermon and CSW is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and CSW Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSW Industrials 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 CSW Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSW Industrials has no effect on the direction of Thermon Group i.e., Thermon Group and CSW Industrials go up and down completely randomly.

Pair Corralation between Thermon Group and CSW Industrials

Considering the 90-day investment horizon Thermon Group Holdings is expected to generate 1.13 times more return on investment than CSW Industrials. However, Thermon Group is 1.13 times more volatile than CSW Industrials. It trades about 0.05 of its potential returns per unit of risk. CSW Industrials is currently generating about -0.15 per unit of risk. 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

Thermon Group Holdings  vs.  CSW Industrials

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.

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.

Pair Trading with Thermon Group and CSW Industrials

The main advantage of trading using opposite Thermon Group and CSW Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermon Group position performs unexpectedly, CSW Industrials 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 CSW Industrials will offset losses from the drop in CSW Industrials' long position.

The idea behind Thermon Group Holdings and CSW Industrials 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.