Correlation Between Melia Hotels and Odyssean Investment

Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Odyssean Investment 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 Melia Hotels and Odyssean Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Melia Hotels and Odyssean Investment Trust, you can compare the effects of market volatilities on Melia Hotels and Odyssean Investment 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 Melia Hotels with a short position of Odyssean Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Odyssean Investment.

Diversification Opportunities for Melia Hotels and Odyssean Investment

0.15

Correlation Coefficient

Melia Hotels  Odyssean Investment

Average diversification

The 3 months correlation between Melia and Odyssean is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Odyssean Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odyssean Investment Trust and Melia 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 Melia Hotels are associated (or correlated) with Odyssean Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odyssean Investment Trust has no effect on the direction of Melia Hotels i.e., Melia Hotels and Odyssean Investment go up and down completely randomly.

Pair Corralation between Melia Hotels and Odyssean Investment

Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.89 times more return on investment than Odyssean Investment. However, Melia Hotels is 1.89 times more volatile than Odyssean Investment Trust. It trades about 0.08 of its potential returns per unit of risk. Odyssean Investment Trust is currently generating about -0.37 per unit of risk. If you would invest  723.00  in Melia Hotels on December 1, 2024 and sell it today you would earn a total of  18.00  from holding Melia Hotels or generate 2.49% return on investment over 90 days.

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

Melia Hotels  vs.  Odyssean Investment Trust

Melia Hotels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Melia Hotels may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Odyssean Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Odyssean Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Odyssean Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Melia Hotels and Odyssean Investment

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

The idea behind Melia Hotels and Odyssean Investment Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.