Correlation Between Bread Financial and Marriott International

Can any of the company-specific risk be diversified away by investing in both Bread Financial and Marriott International 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 Bread Financial and Marriott International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bread Financial Holdings and Marriott International, you can compare the effects of market volatilities on Bread Financial and Marriott International 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 Bread Financial with a short position of Marriott International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Marriott International.

Diversification Opportunities for Bread Financial and Marriott International

0.9

Correlation Coefficient

Bread Financial  Marriott International

Almost no diversification

The 3 months correlation between Bread and Marriott is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Marriott International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marriott International has no effect on the direction of Bread Financial i.e., Bread Financial and Marriott International go up and down completely randomly.

Pair Corralation between Bread Financial and Marriott International

Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.78 times more return on investment than Marriott International. However, Bread Financial is 1.78 times more volatile than Marriott International. It trades about -0.12 of its potential returns per unit of risk. Marriott International is currently generating about -0.22 per unit of risk. If you would invest  9,538  in Bread Financial Holdings on December 25, 2024 and sell it today you would lose (1,988) from holding Bread Financial Holdings or give up 20.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	91.67%
Values	Daily Returns

Bread Financial Holdings  vs.  Marriott International

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Marriott International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marriott International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bread Financial and Marriott International

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

The idea behind Bread Financial Holdings and Marriott International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.