Correlation Between Marriott International and Spindletop

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

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

Diversification Opportunities for Marriott International and Spindletop

-0.68

Correlation Coefficient

Marriott International  Spindletop

Excellent diversification

The 3 months correlation between Marriott and Spindletop is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and Spindletop OG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spindletop OG 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 Spindletop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spindletop OG has no effect on the direction of Marriott International i.e., Marriott International and Spindletop go up and down completely randomly.

Pair Corralation between Marriott International and Spindletop

Considering the 90-day investment horizon Marriott International is expected to generate 0.2 times more return on investment than Spindletop. However, Marriott International is 5.03 times less risky than Spindletop. It trades about 0.06 of its potential returns per unit of risk. Spindletop OG is currently generating about -0.12 per unit of risk. If you would invest  26,097  in Marriott International on October 12, 2024 and sell it today you would earn a total of  1,256  from holding Marriott International or generate 4.81% return on investment over 90 days.

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

Marriott International  vs.  Spindletop OG

Marriott International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Marriott International is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Spindletop OG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spindletop OG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Marriott International and Spindletop

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

The idea behind Marriott International and Spindletop OG 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.