Correlation Between Western Asset and MARRIOTT

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

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

Diversification Opportunities for Western Asset and MARRIOTT

0.1

Correlation Coefficient

Western Asset  MARRIOTT

Average diversification

The 3 months correlation between Western and MARRIOTT is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment 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 Western Asset 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 Western Asset Investment 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 Western Asset i.e., Western Asset and MARRIOTT go up and down completely randomly.

Pair Corralation between Western Asset and MARRIOTT

Considering the 90-day investment horizon Western Asset is expected to generate 110.26 times less return on investment than MARRIOTT. But when comparing it to its historical volatility, Western Asset Investment is 57.35 times less risky than MARRIOTT. It trades about 0.02 of its potential returns per unit of risk. MARRIOTT INTL INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,705  in MARRIOTT INTL INC on September 24, 2024 and sell it today you would lose (9.00) from holding MARRIOTT INTL INC or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.36%
Values	Daily Returns

Western Asset Investment  vs.  MARRIOTT INTL INC

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and MARRIOTT

The main advantage of trading using opposite Western Asset and MARRIOTT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Investment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.