Correlation Between Triton International and China Aircraft

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

Diversification Opportunities for Triton International and China Aircraft

0.74

Correlation Coefficient

Triton International  China Aircraft

Poor diversification

The 3 months correlation between Triton and China is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited and China Aircraft Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Aircraft Leasing 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 China Aircraft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Aircraft Leasing has no effect on the direction of Triton International i.e., Triton International and China Aircraft go up and down completely randomly.

Pair Corralation between Triton International and China Aircraft

Assuming the 90 days trading horizon Triton International is expected to generate 15.41 times less return on investment than China Aircraft. But when comparing it to its historical volatility, Triton International Limited is 7.37 times less risky than China Aircraft. It trades about 0.07 of its potential returns per unit of risk. China Aircraft Leasing is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  30.00  in China Aircraft Leasing on July 13, 2024 and sell it today you would earn a total of  13.00  from holding China Aircraft Leasing or generate 43.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Triton International Limited  vs.  China Aircraft Leasing

Triton International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Triton International Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

China Aircraft Leasing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Aircraft Leasing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, China Aircraft reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Triton International and China Aircraft

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

The idea behind Triton International Limited and China Aircraft Leasing 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.