Correlation Between Bodhi Tree and Oriental Hotels

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

By analyzing existing cross correlation between Bodhi Tree Multimedia and Oriental Hotels Limited, you can compare the effects of market volatilities on Bodhi Tree and Oriental Hotels 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 Bodhi Tree with a short position of Oriental Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodhi Tree and Oriental Hotels.

Diversification Opportunities for Bodhi Tree and Oriental Hotels

0.64

Correlation Coefficient

Bodhi Tree  Oriental Hotels

Poor diversification

The 3 months correlation between Bodhi and Oriental is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bodhi Tree Multimedia and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and Bodhi Tree 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 Bodhi Tree Multimedia are associated (or correlated) with Oriental Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Hotels has no effect on the direction of Bodhi Tree i.e., Bodhi Tree and Oriental Hotels go up and down completely randomly.

Pair Corralation between Bodhi Tree and Oriental Hotels

Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to under-perform the Oriental Hotels. In addition to that, Bodhi Tree is 1.29 times more volatile than Oriental Hotels Limited. It trades about -0.06 of its total potential returns per unit of risk. Oriental Hotels Limited is currently generating about -0.07 per unit of volatility. If you would invest  17,538  in Oriental Hotels Limited on December 26, 2024 and sell it today you would lose (2,604) from holding Oriental Hotels Limited or give up 14.85% of portfolio value over 90 days.

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

Bodhi Tree Multimedia  vs.  Oriental Hotels Limited

Bodhi Tree Multimedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Oriental Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oriental Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Bodhi Tree and Oriental Hotels

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

The idea behind Bodhi Tree Multimedia and Oriental Hotels Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.