Correlation Between TRANSCORP HOTELS and AFRICAN ALLIANCE

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

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

Diversification Opportunities for TRANSCORP HOTELS and AFRICAN ALLIANCE

0.0

Correlation Coefficient

TRANSCORP HOTELS  AFRICAN ALLIANCE

Pay attention - limited upside

The 3 months correlation between TRANSCORP and AFRICAN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCORP HOTELS PLC and AFRICAN ALLIANCE INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN ALLIANCE INS and TRANSCORP 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 TRANSCORP HOTELS PLC are associated (or correlated) with AFRICAN ALLIANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN ALLIANCE INS has no effect on the direction of TRANSCORP HOTELS i.e., TRANSCORP HOTELS and AFRICAN ALLIANCE go up and down completely randomly.

Pair Corralation between TRANSCORP HOTELS and AFRICAN ALLIANCE

If you would invest  11,600  in TRANSCORP HOTELS PLC on December 30, 2024 and sell it today you would earn a total of  1,935  from holding TRANSCORP HOTELS PLC or generate 16.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TRANSCORP HOTELS PLC  vs.  AFRICAN ALLIANCE INSURANCE

TRANSCORP HOTELS PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRANSCORP HOTELS PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, TRANSCORP HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

AFRICAN ALLIANCE INS

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFRICAN ALLIANCE INSURANCE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AFRICAN ALLIANCE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TRANSCORP HOTELS and AFRICAN ALLIANCE

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

The idea behind TRANSCORP HOTELS PLC and AFRICAN ALLIANCE INSURANCE 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.