Correlation Between TRANS NATIONWIDE and NORTHERN NIGERIA

Can any of the company-specific risk be diversified away by investing in both TRANS NATIONWIDE and NORTHERN NIGERIA 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 TRANS NATIONWIDE and NORTHERN NIGERIA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TRANS NATIONWIDE EXPRESS PLC and NORTHERN NIGERIA FLOUR, you can compare the effects of market volatilities on TRANS NATIONWIDE and NORTHERN NIGERIA 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 TRANS NATIONWIDE with a short position of NORTHERN NIGERIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRANS NATIONWIDE and NORTHERN NIGERIA.

Diversification Opportunities for TRANS NATIONWIDE and NORTHERN NIGERIA

0.73

Correlation Coefficient

TRANS NATIONWIDE  NORTHERN NIGERIA

Poor diversification

The 3 months correlation between TRANS and NORTHERN is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding TRANS NATIONWIDE EXPRESS PLC and NORTHERN NIGERIA FLOUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN NIGERIA FLOUR and TRANS NATIONWIDE 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 TRANS NATIONWIDE EXPRESS PLC are associated (or correlated) with NORTHERN NIGERIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN NIGERIA FLOUR has no effect on the direction of TRANS NATIONWIDE i.e., TRANS NATIONWIDE and NORTHERN NIGERIA go up and down completely randomly.

Pair Corralation between TRANS NATIONWIDE and NORTHERN NIGERIA

Assuming the 90 days trading horizon TRANS NATIONWIDE is expected to generate 2.28 times less return on investment than NORTHERN NIGERIA. But when comparing it to its historical volatility, TRANS NATIONWIDE EXPRESS PLC is 1.38 times less risky than NORTHERN NIGERIA. It trades about 0.27 of its potential returns per unit of risk. NORTHERN NIGERIA FLOUR is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  3,375  in NORTHERN NIGERIA FLOUR on September 28, 2024 and sell it today you would earn a total of  1,015  from holding NORTHERN NIGERIA FLOUR or generate 30.07% return on investment over 90 days.

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

TRANS NATIONWIDE EXPRESS PLC  vs.  NORTHERN NIGERIA FLOUR

TRANS NATIONWIDE EXP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRANS NATIONWIDE EXPRESS PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, TRANS NATIONWIDE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NORTHERN NIGERIA FLOUR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHERN NIGERIA FLOUR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, NORTHERN NIGERIA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRANS NATIONWIDE and NORTHERN NIGERIA

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

The idea behind TRANS NATIONWIDE EXPRESS PLC and NORTHERN NIGERIA FLOUR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..