Correlation Between E Home and Marriott International

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

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

Diversification Opportunities for E Home and Marriott International

0.11

Correlation Coefficient

E Home  Marriott International

Average diversification

The 3 months correlation between EJH and Marriott is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and E Home 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 E Home Household Service 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 E Home i.e., E Home and Marriott International go up and down completely randomly.

Pair Corralation between E Home and Marriott International

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the Marriott International. In addition to that, E Home is 7.64 times more volatile than Marriott International. It trades about -0.05 of its total potential returns per unit of risk. Marriott International is currently generating about 0.08 per unit of volatility. If you would invest  16,473  in Marriott International on November 28, 2024 and sell it today you would earn a total of  11,763  from holding Marriott International or generate 71.41% return on investment over 90 days.

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

E Home Household Service  vs.  Marriott International

E Home Household

Risk-Adjusted Performance

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, E Home is not utilizing all of its potentials. The current 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 E Home and Marriott International

The main advantage of trading using opposite E Home and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Home 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 E Home Household Service 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.