Correlation Between Triton International and PennantPark Floating
Can any of the company-specific risk be diversified away by investing in both Triton International and PennantPark Floating 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 PennantPark Floating 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 PennantPark Floating Rate, you can compare the effects of market volatilities on Triton International and PennantPark Floating 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 PennantPark Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triton International and PennantPark Floating.
Diversification Opportunities for Triton International and PennantPark Floating
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Triton and PennantPark is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and PennantPark Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Floating Rate 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 PennantPark Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Floating Rate has no effect on the direction of Triton International i.e., Triton International and PennantPark Floating go up and down completely randomly.
Pair Corralation between Triton International and PennantPark Floating
Assuming the 90 days trading horizon Triton International Limited is expected to generate 0.78 times more return on investment than PennantPark Floating. However, Triton International Limited is 1.28 times less risky than PennantPark Floating. It trades about 0.17 of its potential returns per unit of risk. PennantPark Floating Rate is currently generating about -0.04 per unit of risk. If you would invest 2,480 in Triton International Limited on August 30, 2024 and sell it today you would earn a total of 48.00 from holding Triton International Limited or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Triton International Limited vs. PennantPark Floating Rate
Performance |
| Timeline |
| Triton International |
| PennantPark Floating Rate |
Triton International and PennantPark Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Triton International and PennantPark Floating
The main advantage of trading using opposite Triton International and PennantPark Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triton International position performs unexpectedly, PennantPark Floating 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 PennantPark Floating will offset losses from the drop in PennantPark Floating's long position.The idea behind Triton International Limited and PennantPark Floating Rate 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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