Correlation Between Marriott International and Hilton Worldwide

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

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

Diversification Opportunities for Marriott International and Hilton Worldwide

0.99

Correlation Coefficient

Marriott International  Hilton Worldwide

No risk reduction

The 3 months correlation between Marriott and Hilton is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and Hilton Worldwide Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Worldwide Holdings 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 Hilton Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Worldwide Holdings has no effect on the direction of Marriott International i.e., Marriott International and Hilton Worldwide go up and down completely randomly.

Pair Corralation between Marriott International and Hilton Worldwide

Assuming the 90 days horizon Marriott International is expected to generate 1.24 times more return on investment than Hilton Worldwide. However, Marriott International is 1.24 times more volatile than Hilton Worldwide Holdings. It trades about -0.03 of its potential returns per unit of risk. Hilton Worldwide Holdings is currently generating about -0.07 per unit of risk. If you would invest  27,005  in Marriott International on September 23, 2024 and sell it today you would lose (295.00) from holding Marriott International or give up 1.09% of portfolio value over 90 days.

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

Marriott International  vs.  Hilton Worldwide Holdings

Marriott International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Marriott International reported solid returns over the last few months and may actually be approaching a breakup point.

Hilton Worldwide Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hilton Worldwide reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marriott International and Hilton Worldwide

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

The idea behind Marriott International and Hilton Worldwide Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.