Correlation Between Marriott International and Black Knight

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

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

Diversification Opportunities for Marriott International and Black Knight

0.62

Correlation Coefficient

Marriott International  Black Knight

Poor diversification

The 3 months correlation between Marriott and Black is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight 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 Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of Marriott International i.e., Marriott International and Black Knight go up and down completely randomly.

Pair Corralation between Marriott International and Black Knight

If you would invest  28,429  in Marriott International on September 23, 2024 and sell it today you would lose (33.00) from holding Marriott International or give up 0.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Marriott International  vs.  Black Knight

Marriott International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Marriott International reported solid returns over the last few months and may actually be approaching a breakup point.

Black Knight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Marriott International and Black Knight

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

The idea behind Marriott International and Black Knight 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.