Correlation Between Thermon Group and Ranger Energy

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

Diversification Opportunities for Thermon Group and Ranger Energy

0.69

Correlation Coefficient

Thermon Group  Ranger Energy

Poor diversification

The 3 months correlation between Thermon and Ranger is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services 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 Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of Thermon Group i.e., Thermon Group and Ranger Energy go up and down completely randomly.

Pair Corralation between Thermon Group and Ranger Energy

Considering the 90-day investment horizon Thermon Group Holdings is expected to generate 0.67 times more return on investment than Ranger Energy. However, Thermon Group Holdings is 1.49 times less risky than Ranger Energy. It trades about -0.42 of its potential returns per unit of risk. Ranger Energy Services is currently generating about -0.3 per unit of risk. 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

Thermon Group Holdings  vs.  Ranger Energy Services

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.

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.

Pair Trading with Thermon Group and Ranger Energy

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

The idea behind Thermon Group Holdings and Ranger Energy Services 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.