Correlation Between Choice Hotels and Marriott International

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

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

Diversification Opportunities for Choice Hotels and Marriott International

0.67

Correlation Coefficient

Choice Hotels  Marriott International

Poor diversification

The 3 months correlation between Choice and Marriott is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Choice 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 Choice Hotels International 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 Choice Hotels i.e., Choice Hotels and Marriott International go up and down completely randomly.

Pair Corralation between Choice Hotels and Marriott International

Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.92 times more return on investment than Marriott International. However, Choice Hotels International is 1.09 times less risky than Marriott International. It trades about -0.02 of its potential returns per unit of risk. Marriott International is currently generating about -0.04 per unit of risk. If you would invest  15,093  in Choice Hotels International on November 28, 2024 and sell it today you would lose (277.00) from holding Choice Hotels International or give up 1.84% of portfolio value over 90 days.

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

Choice Hotels International  vs.  Marriott International

Choice Hotels Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Choice Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Choice Hotels is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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. Even with relatively invariable basic indicators, Marriott International is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Choice Hotels and Marriott International

The main advantage of trading using opposite Choice Hotels and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels 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 Choice Hotels International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.