Correlation Between Microsoft and Marriott International

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

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

Diversification Opportunities for Microsoft and Marriott International

0.41

Correlation Coefficient

Microsoft  Marriott International

Very weak diversification

The 3 months correlation between Microsoft and Marriott is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Microsoft 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 Microsoft are associated (or correlated) with Marriott International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marriott International has no effect on the direction of Microsoft i.e., Microsoft and Marriott International go up and down completely randomly.

Pair Corralation between Microsoft and Marriott International

Assuming the 90 days trading horizon Microsoft is expected to generate 0.92 times more return on investment than Marriott International. However, Microsoft is 1.09 times less risky than Marriott International. It trades about -0.14 of its potential returns per unit of risk. Marriott International is currently generating about -0.18 per unit of risk. If you would invest  41,017  in Microsoft on December 24, 2024 and sell it today you would lose (5,352) from holding Microsoft or give up 13.05% of portfolio value over 90 days.

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

Microsoft  vs.  Marriott International

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Marriott International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Microsoft and Marriott International

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

The idea behind Microsoft and Marriott International 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 Global Correlations module to find global opportunities by holding instruments from different markets.