Correlation Between SOFR and MARRIOTT

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

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

Diversification Opportunities for SOFR and MARRIOTT

-0.52

Correlation Coefficient

SOFR  MARRIOTT

Excellent diversification

The 3 months correlation between SOFR and MARRIOTT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and MARRIOTT INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT INTL INC and SOFR 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 SOFR are associated (or correlated) with MARRIOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARRIOTT INTL INC has no effect on the direction of SOFR i.e., SOFR and MARRIOTT go up and down completely randomly.

Pair Corralation between SOFR and MARRIOTT

Given the investment horizon of 90 days SOFR is expected to generate 0.01 times more return on investment than MARRIOTT. However, SOFR is 94.0 times less risky than MARRIOTT. It trades about 0.47 of its potential returns per unit of risk. MARRIOTT INTL INC is currently generating about -0.09 per unit of risk. If you would invest  9,940  in SOFR on September 24, 2024 and sell it today you would earn a total of  110.00  from holding SOFR or generate 1.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	56.92%
Values	Daily Returns

SOFR  vs.  MARRIOTT INTL INC

SOFR

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFR are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, SOFR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

MARRIOTT INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for MARRIOTT INTL INC investors.

Pair Trading with SOFR and MARRIOTT

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

The idea behind SOFR and MARRIOTT INTL INC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.