Correlation Between Triton International and Aarons

Can any of the company-specific risk be diversified away by investing in both Triton International and Aarons 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 Aarons 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 The Aarons, you can compare the effects of market volatilities on Triton International and Aarons 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 Aarons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triton International and Aarons.

Diversification Opportunities for Triton International and Aarons

0.68

Correlation Coefficient

Triton International  Aarons

Poor diversification

The 3 months correlation between Triton and Aarons is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons 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 Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of Triton International i.e., Triton International and Aarons go up and down completely randomly.

Pair Corralation between Triton International and Aarons

Assuming the 90 days trading horizon Triton International is expected to generate 1.12 times less return on investment than Aarons. But when comparing it to its historical volatility, Triton International Limited is 2.37 times less risky than Aarons. It trades about 0.12 of its potential returns per unit of risk. The Aarons is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,006  in The Aarons on September 22, 2024 and sell it today you would earn a total of  3.00  from holding The Aarons or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	15.63%
Values	Daily Returns

Triton International Limited  vs.  The Aarons

Triton International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Triton International Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Triton International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aarons

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aarons is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Triton International and Aarons

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

The idea behind Triton International Limited and The Aarons 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 Stocks Directory module to find actively traded stocks across global markets.