Correlation Between TRANSCORP HOTELS and UNITED BANK

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

Diversification Opportunities for TRANSCORP HOTELS and UNITED BANK

0.44

Correlation Coefficient

TRANSCORP HOTELS  UNITED BANK

Very weak diversification

The 3 months correlation between TRANSCORP and UNITED is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCORP HOTELS PLC and UNITED BANK FOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED BANK FOR 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 UNITED BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED BANK FOR has no effect on the direction of TRANSCORP HOTELS i.e., TRANSCORP HOTELS and UNITED BANK go up and down completely randomly.

Pair Corralation between TRANSCORP HOTELS and UNITED BANK

Assuming the 90 days trading horizon TRANSCORP HOTELS PLC is expected to generate 1.62 times more return on investment than UNITED BANK. However, TRANSCORP HOTELS is 1.62 times more volatile than UNITED BANK FOR. It trades about 0.12 of its potential returns per unit of risk. UNITED BANK FOR is currently generating about 0.08 per unit of risk. If you would invest  10,600  in TRANSCORP HOTELS PLC on December 3, 2024 and sell it today you would earn a total of  2,010  from holding TRANSCORP HOTELS PLC or generate 18.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

TRANSCORP HOTELS PLC  vs.  UNITED BANK FOR

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

UNITED BANK FOR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED BANK FOR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, UNITED BANK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TRANSCORP HOTELS and UNITED BANK

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

The idea behind TRANSCORP HOTELS PLC and UNITED BANK FOR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.