Correlation Between MARRIOTT and Copa Holdings

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

Diversification Opportunities for MARRIOTT and Copa Holdings

0.21

Correlation Coefficient

MARRIOTT  Copa Holdings

Modest diversification

The 3 months correlation between MARRIOTT and Copa is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MARRIOTT INTERNATIONAL INC and Copa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copa Holdings 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 INTERNATIONAL INC are associated (or correlated) with Copa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copa Holdings SA has no effect on the direction of MARRIOTT i.e., MARRIOTT and Copa Holdings go up and down completely randomly.

Pair Corralation between MARRIOTT and Copa Holdings

Assuming the 90 days trading horizon MARRIOTT INTERNATIONAL INC is expected to generate 0.37 times more return on investment than Copa Holdings. However, MARRIOTT INTERNATIONAL INC is 2.73 times less risky than Copa Holdings. It trades about -0.18 of its potential returns per unit of risk. Copa Holdings SA is currently generating about -0.12 per unit of risk. If you would invest  8,826  in MARRIOTT INTERNATIONAL INC on September 25, 2024 and sell it today you would lose (189.00) from holding MARRIOTT INTERNATIONAL INC or give up 2.14% of portfolio value over 90 days.

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

MARRIOTT INTERNATIONAL INC  vs.  Copa Holdings SA

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 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.

Copa Holdings SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copa Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Copa Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MARRIOTT and Copa Holdings

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

The idea behind MARRIOTT INTERNATIONAL INC and Copa Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.