Correlation Between TripAdvisor and Marriott International

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

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

Diversification Opportunities for TripAdvisor and Marriott International

-0.12

Correlation Coefficient

TripAdvisor  Marriott International

Good diversification

The 3 months correlation between TripAdvisor and Marriott is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and TripAdvisor 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 TripAdvisor 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 TripAdvisor i.e., TripAdvisor and Marriott International go up and down completely randomly.

Pair Corralation between TripAdvisor and Marriott International

Given the investment horizon of 90 days TripAdvisor is expected to generate 11.26 times less return on investment than Marriott International. In addition to that, TripAdvisor is 1.95 times more volatile than Marriott International. It trades about 0.01 of its total potential returns per unit of risk. Marriott International is currently generating about 0.12 per unit of volatility. If you would invest  28,082  in Marriott International on September 17, 2024 and sell it today you would earn a total of  626.00  from holding Marriott International or generate 2.23% return on investment over 90 days.

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

TripAdvisor  vs.  Marriott International

TripAdvisor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TripAdvisor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, TripAdvisor is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Marriott International

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Marriott International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TripAdvisor and Marriott International

The main advantage of trading using opposite TripAdvisor and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TripAdvisor 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 TripAdvisor 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.