Correlation Between Triton International and Black Hills
Can any of the company-specific risk be diversified away by investing in both Triton International and Black Hills 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 Black Hills 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 Black Hills, you can compare the effects of market volatilities on Triton International and Black Hills 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 Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triton International and Black Hills.
Diversification Opportunities for Triton International and Black Hills
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Triton and Black is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Triton International i.e., Triton International and Black Hills go up and down completely randomly.
Pair Corralation between Triton International and Black Hills
Assuming the 90 days trading horizon Triton International is expected to generate 3.96 times less return on investment than Black Hills. But when comparing it to its historical volatility, Triton International Limited is 2.71 times less risky than Black Hills. It trades about 0.16 of its potential returns per unit of risk. Black Hills is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,933 in Black Hills on August 30, 2024 and sell it today you would earn a total of 461.00 from holding Black Hills or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Triton International Limited vs. Black Hills
Performance |
| Timeline |
| Triton International |
| Black Hills |
Triton International and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Triton International and Black Hills
The main advantage of trading using opposite Triton International and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triton International position performs unexpectedly, Black Hills 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 Black Hills will offset losses from the drop in Black Hills' long position.The idea behind Triton International Limited and Black Hills 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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