Correlation Between Marriott International and Charter Communications

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

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

Diversification Opportunities for Marriott International and Charter Communications

0.71

Correlation Coefficient

Marriott International  Charter Communications

Poor diversification

The 3 months correlation between Marriott and Charter is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Marriott International 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 Marriott International are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Marriott International i.e., Marriott International and Charter Communications go up and down completely randomly.

Pair Corralation between Marriott International and Charter Communications

Assuming the 90 days trading horizon Marriott International is expected to generate 0.46 times more return on investment than Charter Communications. However, Marriott International is 2.17 times less risky than Charter Communications. It trades about 0.17 of its potential returns per unit of risk. Charter Communications is currently generating about 0.08 per unit of risk. If you would invest  36,766  in Marriott International on October 23, 2024 and sell it today you would earn a total of  5,198  from holding Marriott International or generate 14.14% return on investment over 90 days.

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

Marriott International  vs.  Charter Communications

Marriott International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marriott International sustained solid returns over the last few months and may actually be approaching a breakup point.

Charter Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marriott International and Charter Communications

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

The idea behind Marriott International and Charter Communications 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 Stocks Directory module to find actively traded stocks across global markets.