Correlation Between TRANSCORP HOTELS and BUA FOODS

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

Diversification Opportunities for TRANSCORP HOTELS and BUA FOODS

-0.63

Correlation Coefficient

TRANSCORP HOTELS  BUA FOODS

Excellent diversification

The 3 months correlation between TRANSCORP and BUA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding TRANSCORP HOTELS PLC and BUA FOODS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BUA FOODS 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 BUA FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BUA FOODS PLC has no effect on the direction of TRANSCORP HOTELS i.e., TRANSCORP HOTELS and BUA FOODS go up and down completely randomly.

Pair Corralation between TRANSCORP HOTELS and BUA FOODS

Assuming the 90 days trading horizon TRANSCORP HOTELS is expected to generate 2.61 times less return on investment than BUA FOODS. In addition to that, TRANSCORP HOTELS is 1.93 times more volatile than BUA FOODS PLC. It trades about 0.03 of its total potential returns per unit of risk. BUA FOODS PLC is currently generating about 0.16 per unit of volatility. If you would invest  41,800  in BUA FOODS PLC on May 5, 2025 and sell it today you would earn a total of  6,540  from holding BUA FOODS PLC or generate 15.65% return on investment over 90 days.

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

TRANSCORP HOTELS PLC  vs.  BUA FOODS PLC

TRANSCORP HOTELS PLC

Risk-Adjusted Performance

Weak

Over the last 90 days TRANSCORP HOTELS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TRANSCORP HOTELS is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BUA FOODS PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BUA FOODS PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, BUA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRANSCORP HOTELS and BUA FOODS

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

The idea behind TRANSCORP HOTELS PLC and BUA FOODS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.