Correlation Between Thermon Group and Melrose Industries
Can any of the company-specific risk be diversified away by investing in both Thermon Group and Melrose Industries 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 Melrose Industries 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 Melrose Industries PLC, you can compare the effects of market volatilities on Thermon Group and Melrose Industries 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 Melrose Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermon Group and Melrose Industries.
Diversification Opportunities for Thermon Group and Melrose Industries
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Thermon and Melrose is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and Melrose Industries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melrose Industries PLC 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 Melrose Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melrose Industries PLC has no effect on the direction of Thermon Group i.e., Thermon Group and Melrose Industries go up and down completely randomly.
Pair Corralation between Thermon Group and Melrose Industries
Considering the 90-day investment horizon Thermon Group Holdings is expected to under-perform the Melrose Industries. But the stock apears to be less risky and, when comparing its historical volatility, Thermon Group Holdings is 2.14 times less risky than Melrose Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Melrose Industries PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 696.00 in Melrose Industries PLC on November 18, 2024 and sell it today you would earn a total of 109.00 from holding Melrose Industries PLC or generate 15.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
Thermon Group Holdings vs. Melrose Industries PLC
Performance |
Timeline |
Thermon Group Holdings |
Melrose Industries PLC |
Thermon Group and Melrose Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Thermon Group and Melrose Industries
The main advantage of trading using opposite Thermon Group and Melrose Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermon Group position performs unexpectedly, Melrose Industries 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 Melrose Industries will offset losses from the drop in Melrose Industries' long position.Thermon Group vs. Hurco Companies | ||
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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