Correlation Between Triton International and Timken

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

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

Diversification Opportunities for Triton International and Timken

0.24

Correlation Coefficient

Triton International  Timken

Modest diversification

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

Pair Corralation between Triton International and Timken

Assuming the 90 days trading horizon Triton International Limited is expected to generate 0.2 times more return on investment than Timken. However, Triton International Limited is 4.92 times less risky than Timken. It trades about -0.01 of its potential returns per unit of risk. Timken Company is currently generating about -0.03 per unit of risk. 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	100.0%
Values	Daily Returns

Triton International Limited  vs.  Timken Company

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.

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.

Pair Trading with Triton International and Timken

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

The idea behind Triton International Limited and Timken Company 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.