Correlation Between IKEJA HOTELS and TRANS NATIONWIDE

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

By analyzing existing cross correlation between IKEJA HOTELS PLC and TRANS NATIONWIDE EXPRESS PLC, you can compare the effects of market volatilities on IKEJA HOTELS and TRANS NATIONWIDE 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 IKEJA HOTELS with a short position of TRANS NATIONWIDE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IKEJA HOTELS and TRANS NATIONWIDE.

Diversification Opportunities for IKEJA HOTELS and TRANS NATIONWIDE

0.89

Correlation Coefficient

IKEJA HOTELS  TRANS NATIONWIDE

Very poor diversification

The 3 months correlation between IKEJA and TRANS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding IKEJA HOTELS PLC and TRANS NATIONWIDE EXPRESS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANS NATIONWIDE EXP and IKEJA HOTELS 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 IKEJA HOTELS PLC are associated (or correlated) with TRANS NATIONWIDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANS NATIONWIDE EXP has no effect on the direction of IKEJA HOTELS i.e., IKEJA HOTELS and TRANS NATIONWIDE go up and down completely randomly.

Pair Corralation between IKEJA HOTELS and TRANS NATIONWIDE

Assuming the 90 days trading horizon IKEJA HOTELS PLC is expected to generate 1.26 times more return on investment than TRANS NATIONWIDE. However, IKEJA HOTELS is 1.26 times more volatile than TRANS NATIONWIDE EXPRESS PLC. It trades about 0.52 of its potential returns per unit of risk. TRANS NATIONWIDE EXPRESS PLC is currently generating about 0.52 per unit of risk. If you would invest  880.00  in IKEJA HOTELS PLC on October 16, 2024 and sell it today you would earn a total of  510.00  from holding IKEJA HOTELS PLC or generate 57.95% return on investment over 90 days.

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

IKEJA HOTELS PLC  vs.  TRANS NATIONWIDE EXPRESS PLC

IKEJA HOTELS PLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IKEJA HOTELS PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, IKEJA HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

TRANS NATIONWIDE EXP

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRANS NATIONWIDE EXPRESS PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, TRANS NATIONWIDE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IKEJA HOTELS and TRANS NATIONWIDE

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

The idea behind IKEJA HOTELS PLC and TRANS NATIONWIDE EXPRESS PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.