Correlation Between Timken and Triton International

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

By analyzing existing cross correlation between Timken Company and Triton International Limited, you can compare the effects of market volatilities on Timken and Triton International 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 Timken with a short position of Triton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Triton International.

Diversification Opportunities for Timken and Triton International

0.24

Correlation Coefficient

Timken  Triton International

Modest diversification

The 3 months correlation between Timken and Triton is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Triton International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triton International and Timken 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 Timken Company are associated (or correlated) with Triton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triton International has no effect on the direction of Timken i.e., Timken and Triton International go up and down completely randomly.

Pair Corralation between Timken and Triton International

Considering the 90-day investment horizon Timken Company is expected to under-perform the Triton International. In addition to that, Timken is 4.88 times more volatile than Triton International Limited. It trades about -0.04 of its total potential returns per unit of risk. Triton International Limited is currently generating about -0.01 per unit of volatility. If you would invest  2,460  in Triton International Limited on September 17, 2024 and sell it today you would lose (8.00) from holding Triton International Limited or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Timken Company  vs.  Triton International Limited

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Triton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triton International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Triton International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Timken and Triton International

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

The idea behind Timken Company and Triton International Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.