Correlation Between MARRIOTT and ON Semiconductor

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

By analyzing existing cross correlation between MARRIOTT INTERNATIONAL INC and ON Semiconductor, you can compare the effects of market volatilities on MARRIOTT and ON Semiconductor 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 ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARRIOTT and ON Semiconductor.

Diversification Opportunities for MARRIOTT and ON Semiconductor

0.13

Correlation Coefficient

MARRIOTT  ON Semiconductor

Average diversification

The 3 months correlation between MARRIOTT and ON Semiconductor is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MARRIOTT INTERNATIONAL INC and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor 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 INTERNATIONAL INC are associated (or correlated) with ON Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON Semiconductor has no effect on the direction of MARRIOTT i.e., MARRIOTT and ON Semiconductor go up and down completely randomly.

Pair Corralation between MARRIOTT and ON Semiconductor

Assuming the 90 days trading horizon MARRIOTT INTERNATIONAL INC is expected to generate 0.37 times more return on investment than ON Semiconductor. However, MARRIOTT INTERNATIONAL INC is 2.7 times less risky than ON Semiconductor. It trades about -0.27 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.15 per unit of risk. If you would invest  9,892  in MARRIOTT INTERNATIONAL INC on September 24, 2024 and sell it today you would lose (482.00) from holding MARRIOTT INTERNATIONAL INC or give up 4.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

MARRIOTT INTERNATIONAL INC  vs.  ON Semiconductor

MARRIOTT INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for MARRIOTT INTERNATIONAL INC investors.

ON Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ON Semiconductor is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MARRIOTT and ON Semiconductor

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

The idea behind MARRIOTT INTERNATIONAL INC and ON Semiconductor 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.