Correlation Between MARRIOTT and ServiceNow

Can any of the company-specific risk be diversified away by investing in both MARRIOTT and ServiceNow 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 ServiceNow 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 ServiceNow, you can compare the effects of market volatilities on MARRIOTT and ServiceNow 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 ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARRIOTT and ServiceNow.

Diversification Opportunities for MARRIOTT and ServiceNow

-0.47

Correlation Coefficient

MARRIOTT  ServiceNow

Very good diversification

The 3 months correlation between MARRIOTT and ServiceNow is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding MARRIOTT INTL INC and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow 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 ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of MARRIOTT i.e., MARRIOTT and ServiceNow go up and down completely randomly.

Pair Corralation between MARRIOTT and ServiceNow

Assuming the 90 days trading horizon MARRIOTT INTL INC is expected to generate 27.69 times more return on investment than ServiceNow. However, MARRIOTT is 27.69 times more volatile than ServiceNow. It trades about 0.05 of its potential returns per unit of risk. ServiceNow is currently generating about 0.11 per unit of risk. If you would invest  8,905  in MARRIOTT INTL INC on September 29, 2024 and sell it today you would earn a total of  440.00  from holding MARRIOTT INTL INC or generate 4.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	63.91%
Values	Daily Returns

MARRIOTT INTL INC  vs.  ServiceNow

MARRIOTT INTL INC

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MARRIOTT INTL INC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, MARRIOTT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ServiceNow

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MARRIOTT and ServiceNow

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

The idea behind MARRIOTT INTL INC and ServiceNow 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.