Correlation Between TRANSCORP HOTELS and INTERNATIONAL ENERGY

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

Diversification Opportunities for TRANSCORP HOTELS and INTERNATIONAL ENERGY

0.87

Correlation Coefficient

TRANSCORP HOTELS  INTERNATIONAL ENERGY

Very poor diversification

The 3 months correlation between TRANSCORP and INTERNATIONAL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCORP HOTELS PLC and INTERNATIONAL ENERGY INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL ENERGY 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 INTERNATIONAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL ENERGY has no effect on the direction of TRANSCORP HOTELS i.e., TRANSCORP HOTELS and INTERNATIONAL ENERGY go up and down completely randomly.

Pair Corralation between TRANSCORP HOTELS and INTERNATIONAL ENERGY

Assuming the 90 days trading horizon TRANSCORP HOTELS is expected to generate 1.72 times less return on investment than INTERNATIONAL ENERGY. But when comparing it to its historical volatility, TRANSCORP HOTELS PLC is 2.6 times less risky than INTERNATIONAL ENERGY. It trades about 0.18 of its potential returns per unit of risk. INTERNATIONAL ENERGY INSURANCE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  145.00  in INTERNATIONAL ENERGY INSURANCE on October 25, 2024 and sell it today you would earn a total of  45.00  from holding INTERNATIONAL ENERGY INSURANCE or generate 31.03% return on investment over 90 days.

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

TRANSCORP HOTELS PLC  vs.  INTERNATIONAL ENERGY INSURANCE

TRANSCORP HOTELS PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRANSCORP HOTELS PLC are ranked lower than 14 (%) 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.

INTERNATIONAL ENERGY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL ENERGY INSURANCE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, INTERNATIONAL ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRANSCORP HOTELS and INTERNATIONAL ENERGY

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

The idea behind TRANSCORP HOTELS PLC and INTERNATIONAL ENERGY 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.