Correlation Between LIVINGTRUST MORTGAGE and TRANSCORP HOTELS

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

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

Diversification Opportunities for LIVINGTRUST MORTGAGE and TRANSCORP HOTELS

0.61

Correlation Coefficient

LIVINGTRUST MORTGAGE  TRANSCORP HOTELS

Poor diversification

The 3 months correlation between LIVINGTRUST and TRANSCORP is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LIVINGTRUST MORTGAGE BANK and TRANSCORP HOTELS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANSCORP HOTELS PLC and LIVINGTRUST MORTGAGE 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 LIVINGTRUST MORTGAGE BANK are associated (or correlated) with TRANSCORP HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANSCORP HOTELS PLC has no effect on the direction of LIVINGTRUST MORTGAGE i.e., LIVINGTRUST MORTGAGE and TRANSCORP HOTELS go up and down completely randomly.

Pair Corralation between LIVINGTRUST MORTGAGE and TRANSCORP HOTELS

Assuming the 90 days trading horizon LIVINGTRUST MORTGAGE BANK is expected to generate 2.02 times more return on investment than TRANSCORP HOTELS. However, LIVINGTRUST MORTGAGE is 2.02 times more volatile than TRANSCORP HOTELS PLC. It trades about 0.33 of its potential returns per unit of risk. TRANSCORP HOTELS PLC is currently generating about 0.16 per unit of risk. If you would invest  300.00  in LIVINGTRUST MORTGAGE BANK on October 9, 2024 and sell it today you would earn a total of  138.00  from holding LIVINGTRUST MORTGAGE BANK or generate 46.0% return on investment over 90 days.

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

LIVINGTRUST MORTGAGE BANK  vs.  TRANSCORP HOTELS PLC

LIVINGTRUST MORTGAGE BANK

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LIVINGTRUST MORTGAGE BANK are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, LIVINGTRUST MORTGAGE unveiled solid returns over the last few months and may actually be approaching a breakup point.

TRANSCORP HOTELS PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRANSCORP HOTELS PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, TRANSCORP HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIVINGTRUST MORTGAGE and TRANSCORP HOTELS

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

The idea behind LIVINGTRUST MORTGAGE BANK and TRANSCORP HOTELS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.