Correlation Between Trinity Capital and Golub Capital

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

By analyzing existing cross correlation between Trinity Capital and Golub Capital BDC, you can compare the effects of market volatilities on Trinity Capital and Golub Capital 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 Trinity Capital with a short position of Golub Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trinity Capital and Golub Capital.

Diversification Opportunities for Trinity Capital and Golub Capital

0.87

Correlation Coefficient

Trinity Capital  Golub Capital

Very poor diversification

The 3 months correlation between Trinity and Golub is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Capital and Golub Capital BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golub Capital BDC and Trinity Capital 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 Trinity Capital are associated (or correlated) with Golub Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golub Capital BDC has no effect on the direction of Trinity Capital i.e., Trinity Capital and Golub Capital go up and down completely randomly.

Pair Corralation between Trinity Capital and Golub Capital

Given the investment horizon of 90 days Trinity Capital is expected to generate 1.42 times more return on investment than Golub Capital. However, Trinity Capital is 1.42 times more volatile than Golub Capital BDC. It trades about 0.24 of its potential returns per unit of risk. Golub Capital BDC is currently generating about 0.06 per unit of risk. If you would invest  1,416  in Trinity Capital on November 29, 2024 and sell it today you would earn a total of  238.00  from holding Trinity Capital or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Trinity Capital  vs.  Golub Capital BDC

Trinity Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Capital are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Trinity Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Golub Capital BDC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Trinity Capital and Golub Capital

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

The idea behind Trinity Capital and Golub Capital BDC 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.