Correlation Between MELIA HOTELS and Old Dominion

Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Old Dominion 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 Old Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MELIA HOTELS and Old Dominion Freight, you can compare the effects of market volatilities on MELIA HOTELS and Old Dominion 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 Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Old Dominion.

Diversification Opportunities for MELIA HOTELS and Old Dominion

0.29

Correlation Coefficient

MELIA HOTELS  Old Dominion

Modest diversification

The 3 months correlation between MELIA and Old is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Old Dominion go up and down completely randomly.

Pair Corralation between MELIA HOTELS and Old Dominion

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 0.88 times more return on investment than Old Dominion. However, MELIA HOTELS is 1.14 times less risky than Old Dominion. It trades about 0.03 of its potential returns per unit of risk. Old Dominion Freight is currently generating about 0.01 per unit of risk. If you would invest  633.00  in MELIA HOTELS on October 4, 2024 and sell it today you would earn a total of  93.00  from holding MELIA HOTELS or generate 14.69% return on investment over 90 days.

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

MELIA HOTELS  vs.  Old Dominion Freight

MELIA HOTELS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MELIA HOTELS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Old Dominion Freight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Old Dominion is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MELIA HOTELS and Old Dominion

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

The idea behind MELIA HOTELS and Old Dominion Freight 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.