Correlation Between Triton International and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Triton International and Illinois Tool 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 Illinois Tool 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 Illinois Tool Works, you can compare the effects of market volatilities on Triton International and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triton International and Illinois Tool.
Diversification Opportunities for Triton International and Illinois Tool
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Triton and Illinois is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Triton International i.e., Triton International and Illinois Tool go up and down completely randomly.
Pair Corralation between Triton International and Illinois Tool
Assuming the 90 days trading horizon Triton International Limited is expected to under-perform the Illinois Tool. But the preferred stock apears to be less risky and, when comparing its historical volatility, Triton International Limited is 1.56 times less risky than Illinois Tool. The preferred stock trades about -0.09 of its potential returns per unit of risk. The Illinois Tool Works is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 25,638 in Illinois Tool Works on November 18, 2024 and sell it today you would earn a total of 173.00 from holding Illinois Tool Works or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Triton International Limited vs. Illinois Tool Works
Performance |
| Timeline |
| Triton International |
| Illinois Tool Works |
Triton International and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Triton International and Illinois Tool
The main advantage of trading using opposite Triton International and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triton International position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.The idea behind Triton International Limited and Illinois Tool Works 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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