Correlation Between TRANSCORP HOTELS and SECURE ELECTRONIC

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

Diversification Opportunities for TRANSCORP HOTELS and SECURE ELECTRONIC

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between TRANSCORP and SECURE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCORP HOTELS PLC and SECURE ELECTRONIC TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECURE ELECTRONIC 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 SECURE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECURE ELECTRONIC has no effect on the direction of TRANSCORP HOTELS i.e., TRANSCORP HOTELS and SECURE ELECTRONIC go up and down completely randomly.

Pair Corralation between TRANSCORP HOTELS and SECURE ELECTRONIC

Assuming the 90 days trading horizon TRANSCORP HOTELS is expected to generate 1.35 times less return on investment than SECURE ELECTRONIC. But when comparing it to its historical volatility, TRANSCORP HOTELS PLC is 3.05 times less risky than SECURE ELECTRONIC. It trades about 0.08 of its potential returns per unit of risk. SECURE ELECTRONIC TECHNOLOGY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  59.00  in SECURE ELECTRONIC TECHNOLOGY on September 29, 2024 and sell it today you would earn a total of  4.00  from holding SECURE ELECTRONIC TECHNOLOGY or generate 6.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

TRANSCORP HOTELS PLC  vs.  SECURE ELECTRONIC TECHNOLOGY

 Performance 
       Timeline  
TRANSCORP HOTELS PLC 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
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.
SECURE ELECTRONIC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SECURE ELECTRONIC TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, SECURE ELECTRONIC is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

TRANSCORP HOTELS and SECURE ELECTRONIC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TRANSCORP HOTELS and SECURE ELECTRONIC

The main advantage of trading using opposite TRANSCORP HOTELS and SECURE ELECTRONIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRANSCORP HOTELS position performs unexpectedly, SECURE ELECTRONIC 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 SECURE ELECTRONIC will offset losses from the drop in SECURE ELECTRONIC's long position.
The idea behind TRANSCORP HOTELS PLC and SECURE ELECTRONIC TECHNOLOGY 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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