Correlation Between Triton International and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both Triton International and Herc Holdings 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 Herc Holdings 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 Herc Holdings, you can compare the effects of market volatilities on Triton International and Herc Holdings 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 Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triton International and Herc Holdings.
Diversification Opportunities for Triton International and Herc Holdings
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Triton and Herc is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings 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 Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Triton International i.e., Triton International and Herc Holdings go up and down completely randomly.
Pair Corralation between Triton International and Herc Holdings
Assuming the 90 days trading horizon Triton International is expected to generate 7.76 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, Triton International Limited is 3.84 times less risky than Herc Holdings. It trades about 0.04 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 15,717 in Herc Holdings on August 27, 2024 and sell it today you would earn a total of 6,575 from holding Herc Holdings or generate 41.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Triton International Limited vs. Herc Holdings
Performance |
| Timeline |
| Triton International |
| Herc Holdings |
Triton International and Herc Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Triton International and Herc Holdings
The main advantage of trading using opposite Triton International and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triton International position performs unexpectedly, Herc Holdings 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 Herc Holdings will offset losses from the drop in Herc Holdings' long position.The idea behind Triton International Limited and Herc Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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