Correlation Between InterContinental and Marriott International

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

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

Diversification Opportunities for InterContinental and Marriott International

0.66

Correlation Coefficient

InterContinental  Marriott International

Poor diversification

The 3 months correlation between InterContinental and Marriott is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and InterContinental 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 InterContinental Hotels Group 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 InterContinental i.e., InterContinental and Marriott International go up and down completely randomly.

Pair Corralation between InterContinental and Marriott International

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to under-perform the Marriott International. But the stock apears to be less risky and, when comparing its historical volatility, InterContinental Hotels Group is 1.1 times less risky than Marriott International. The stock trades about -0.01 of its potential returns per unit of risk. The Marriott International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  26,895  in Marriott International on November 29, 2024 and sell it today you would earn a total of  105.00  from holding Marriott International or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

InterContinental Hotels Group  vs.  Marriott International

InterContinental Hotels

Risk-Adjusted Performance

Very Weak

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

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 nearly stable basic indicators, Marriott International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with InterContinental and Marriott International

The main advantage of trading using opposite InterContinental and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental 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 InterContinental Hotels Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.