Correlation Between Thermon Group and NCS Multistage

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

Diversification Opportunities for Thermon Group and NCS Multistage

0.72

Correlation Coefficient

Thermon Group  NCS Multistage

Poor diversification

The 3 months correlation between Thermon and NCS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and NCS Multistage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCS Multistage Holdings 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 NCS Multistage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCS Multistage Holdings has no effect on the direction of Thermon Group i.e., Thermon Group and NCS Multistage go up and down completely randomly.

Pair Corralation between Thermon Group and NCS Multistage

Considering the 90-day investment horizon Thermon Group Holdings is expected to under-perform the NCS Multistage. But the stock apears to be less risky and, when comparing its historical volatility, Thermon Group Holdings is 3.77 times less risky than NCS Multistage. The stock trades about -0.42 of its potential returns per unit of risk. The NCS Multistage Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,295  in NCS Multistage Holdings on September 26, 2024 and sell it today you would earn a total of  154.00  from holding NCS Multistage Holdings or generate 6.71% return on investment over 90 days.

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

Thermon Group Holdings  vs.  NCS Multistage Holdings

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.

NCS Multistage Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NCS Multistage Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NCS Multistage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thermon Group and NCS Multistage

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

The idea behind Thermon Group Holdings and NCS Multistage 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.