Correlation Between Thermon Group and Huron Consulting

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

Diversification Opportunities for Thermon Group and Huron Consulting

0.46

Correlation Coefficient

Thermon Group  Huron Consulting

Very weak diversification

The 3 months correlation between Thermon and Huron is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Thermon Group Holdings and Huron Consulting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huron Consulting 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 Huron Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huron Consulting has no effect on the direction of Thermon Group i.e., Thermon Group and Huron Consulting go up and down completely randomly.

Pair Corralation between Thermon Group and Huron Consulting

Considering the 90-day investment horizon Thermon Group is expected to generate 4.41 times less return on investment than Huron Consulting. In addition to that, Thermon Group is 1.52 times more volatile than Huron Consulting Group. It trades about 0.02 of its total potential returns per unit of risk. Huron Consulting Group is currently generating about 0.14 per unit of volatility. If you would invest  9,752  in Huron Consulting Group on June 24, 2024 and sell it today you would earn a total of  1,303  from holding Huron Consulting Group or generate 13.36% return on investment over 90 days.

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

Thermon Group Holdings  vs.  Huron Consulting Group

Thermon Group Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thermon Group Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Huron Consulting

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huron Consulting Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Huron Consulting displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thermon Group and Huron Consulting

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

The idea behind Thermon Group Holdings and Huron Consulting Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.