Correlation Between Golub Capital and Trinity Capital

Can any of the company-specific risk be diversified away by investing in both Golub Capital and Trinity Capital 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 Golub Capital and Trinity Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Golub Capital BDC and Trinity Capital, you can compare the effects of market volatilities on Golub Capital and Trinity Capital 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 Golub Capital with a short position of Trinity Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golub Capital and Trinity Capital.

Diversification Opportunities for Golub Capital and Trinity Capital

0.72

Correlation Coefficient

Golub Capital  Trinity Capital

Poor diversification

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

Pair Corralation between Golub Capital and Trinity Capital

Given the investment horizon of 90 days Golub Capital is expected to generate 1.73 times less return on investment than Trinity Capital. But when comparing it to its historical volatility, Golub Capital BDC is 1.36 times less risky than Trinity Capital. It trades about 0.08 of its potential returns per unit of risk. Trinity Capital is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,353  in Trinity Capital on August 30, 2024 and sell it today you would earn a total of  95.00  from holding Trinity Capital or generate 7.02% return on investment over 90 days.

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

Golub Capital BDC  vs.  Trinity Capital

Golub Capital BDC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Trinity Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Trinity Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Golub Capital and Trinity Capital

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

The idea behind Golub Capital BDC and Trinity Capital 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.