Correlation Between Triton International and McGrath RentCorp

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

Diversification Opportunities for Triton International and McGrath RentCorp

0.41

Correlation Coefficient

Triton International  McGrath RentCorp

Very weak diversification

The 3 months correlation between Triton and McGrath is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp 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 McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of Triton International i.e., Triton International and McGrath RentCorp go up and down completely randomly.

Pair Corralation between Triton International and McGrath RentCorp

Assuming the 90 days trading horizon Triton International Limited is expected to generate 0.25 times more return on investment than McGrath RentCorp. However, Triton International Limited is 4.05 times less risky than McGrath RentCorp. It trades about 0.24 of its potential returns per unit of risk. McGrath RentCorp is currently generating about -0.34 per unit of risk. If you would invest  2,490  in Triton International Limited on September 23, 2024 and sell it today you would earn a total of  30.00  from holding Triton International Limited or generate 1.2% 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.  McGrath RentCorp

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 recent stock price disturbance, may contribute to short-term losses for the investors.

McGrath RentCorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, McGrath RentCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Triton International and McGrath RentCorp

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

The idea behind Triton International Limited and McGrath RentCorp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.