Correlation Between Marriott International and Hotis Othon

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

By analyzing existing cross correlation between Marriott International and Hotis Othon SA, you can compare the effects of market volatilities on Marriott International and Hotis Othon 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 Hotis Othon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marriott International and Hotis Othon.

Diversification Opportunities for Marriott International and Hotis Othon

0.66

Correlation Coefficient

Marriott International  Hotis Othon

Poor diversification

The 3 months correlation between Marriott and Hotis is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and Hotis Othon SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotis Othon SA 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 Hotis Othon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotis Othon SA has no effect on the direction of Marriott International i.e., Marriott International and Hotis Othon go up and down completely randomly.

Pair Corralation between Marriott International and Hotis Othon

Assuming the 90 days trading horizon Marriott International is expected to generate 0.53 times more return on investment than Hotis Othon. However, Marriott International is 1.9 times less risky than Hotis Othon. It trades about 0.23 of its potential returns per unit of risk. Hotis Othon SA is currently generating about -0.01 per unit of risk. If you would invest  37,276  in Marriott International on October 6, 2024 and sell it today you would earn a total of  5,122  from holding Marriott International or generate 13.74% 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.  Hotis Othon SA

Marriott International

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 18 (%) 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.

Hotis Othon SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hotis Othon SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hotis Othon is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Marriott International and Hotis Othon

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

The idea behind Marriott International and Hotis Othon SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.