Correlation Between Triton International and Air Lease

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

Diversification Opportunities for Triton International and Air Lease

0.23

Correlation Coefficient

Triton International  Air Lease

Modest diversification

The 3 months correlation between Triton and Air is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Triton International i.e., Triton International and Air Lease go up and down completely randomly.

Pair Corralation between Triton International and Air Lease

Assuming the 90 days trading horizon Triton International is expected to generate 9.14 times less return on investment than Air Lease. But when comparing it to its historical volatility, Triton International Limited is 10.99 times less risky than Air Lease. It trades about 0.11 of its potential returns per unit of risk. Air Lease is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,620  in Air Lease on December 2, 2024 and sell it today you would earn a total of  172.00  from holding Air Lease or generate 3.72% return on investment over 90 days.

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

Triton International Limited  vs.  Air Lease

Triton International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Triton International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Triton International is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Triton International and Air Lease

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

The idea behind Triton International Limited and Air Lease 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.