Correlation Between TRANSCORP HOTELS and NIGERIAN BREWERIES

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

Diversification Opportunities for TRANSCORP HOTELS and NIGERIAN BREWERIES

0.38

Correlation Coefficient

TRANSCORP HOTELS  NIGERIAN BREWERIES

Weak diversification

The 3 months correlation between TRANSCORP and NIGERIAN is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCORP HOTELS PLC and NIGERIAN BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIGERIAN BREWERIES PLC 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 NIGERIAN BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIGERIAN BREWERIES PLC has no effect on the direction of TRANSCORP HOTELS i.e., TRANSCORP HOTELS and NIGERIAN BREWERIES go up and down completely randomly.

Pair Corralation between TRANSCORP HOTELS and NIGERIAN BREWERIES

Assuming the 90 days trading horizon TRANSCORP HOTELS PLC is expected to generate 1.03 times more return on investment than NIGERIAN BREWERIES. However, TRANSCORP HOTELS is 1.03 times more volatile than NIGERIAN BREWERIES PLC. It trades about 0.22 of its potential returns per unit of risk. NIGERIAN BREWERIES PLC is currently generating about 0.0 per unit of risk. If you would invest  625.00  in TRANSCORP HOTELS PLC on October 9, 2024 and sell it today you would earn a total of  10,975  from holding TRANSCORP HOTELS PLC or generate 1756.0% return on investment over 90 days.

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

TRANSCORP HOTELS PLC  vs.  NIGERIAN BREWERIES PLC

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 weak basic indicators, TRANSCORP HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

NIGERIAN BREWERIES PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NIGERIAN BREWERIES PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, NIGERIAN BREWERIES may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TRANSCORP HOTELS and NIGERIAN BREWERIES

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

The idea behind TRANSCORP HOTELS PLC and NIGERIAN BREWERIES 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.