Correlation Between Alerian Energy and MARRIOTT

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

By analyzing existing cross correlation between Alerian Energy Infrastructure and MARRIOTT INTL INC, you can compare the effects of market volatilities on Alerian Energy and MARRIOTT 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 Alerian Energy with a short position of MARRIOTT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alerian Energy and MARRIOTT.

Diversification Opportunities for Alerian Energy and MARRIOTT

-0.35

Correlation Coefficient

Alerian Energy  MARRIOTT

Very good diversification

The 3 months correlation between Alerian and MARRIOTT is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alerian Energy Infrastructure and MARRIOTT INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT INTL INC and Alerian Energy 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 Alerian Energy Infrastructure are associated (or correlated) with MARRIOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARRIOTT INTL INC has no effect on the direction of Alerian Energy i.e., Alerian Energy and MARRIOTT go up and down completely randomly.

Pair Corralation between Alerian Energy and MARRIOTT

Given the investment horizon of 90 days Alerian Energy Infrastructure is expected to generate 0.75 times more return on investment than MARRIOTT. However, Alerian Energy Infrastructure is 1.33 times less risky than MARRIOTT. It trades about -0.21 of its potential returns per unit of risk. MARRIOTT INTL INC is currently generating about -0.31 per unit of risk. If you would invest  3,238  in Alerian Energy Infrastructure on September 24, 2024 and sell it today you would lose (178.00) from holding Alerian Energy Infrastructure or give up 5.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Alerian Energy Infrastructure  vs.  MARRIOTT INTL INC

Alerian Energy Infra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Alerian Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MARRIOTT INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alerian Energy and MARRIOTT

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

The idea behind Alerian Energy Infrastructure and MARRIOTT INTL INC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.