Correlation Between MARRIOTT and LAir Liquide

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

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

Diversification Opportunities for MARRIOTT and LAir Liquide

0.38

Correlation Coefficient

MARRIOTT  LAir Liquide

Weak diversification

The 3 months correlation between MARRIOTT and LAir is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MARRIOTT INTL INC and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA and MARRIOTT 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 INTL INC are associated (or correlated) with LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of MARRIOTT i.e., MARRIOTT and LAir Liquide go up and down completely randomly.

Pair Corralation between MARRIOTT and LAir Liquide

Assuming the 90 days trading horizon MARRIOTT INTL INC is expected to generate 0.51 times more return on investment than LAir Liquide. However, MARRIOTT INTL INC is 1.94 times less risky than LAir Liquide. It trades about -0.21 of its potential returns per unit of risk. LAir Liquide SA is currently generating about -0.13 per unit of risk. If you would invest  9,968  in MARRIOTT INTL INC on October 10, 2024 and sell it today you would lose (360.00) from holding MARRIOTT INTL INC or give up 3.61% of portfolio value over 90 days.

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

MARRIOTT INTL INC  vs.  LAir Liquide SA

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 somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LAir Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAir Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MARRIOTT and LAir Liquide

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

The idea behind MARRIOTT INTL INC and LAir Liquide SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.