Correlation Between InterContinental and Marriott International
Can any of the company-specific risk be diversified away by investing in both InterContinental 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 InterContinental and Marriott International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InterContinental Hotels Group and Marriott International, you can compare the effects of market volatilities on InterContinental 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 InterContinental with a short position of Marriott International. Check out your portfolio center. Please also check ongoing floating volatility patterns of InterContinental and Marriott International.
Diversification Opportunities for InterContinental and Marriott International
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between InterContinental and Marriott is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and InterContinental 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 InterContinental Hotels Group 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 InterContinental i.e., InterContinental and Marriott International go up and down completely randomly.
Pair Corralation between InterContinental and Marriott International
Considering the 90-day investment horizon InterContinental Hotels Group is expected to generate 0.95 times more return on investment than Marriott International. However, InterContinental Hotels Group is 1.06 times less risky than Marriott International. It trades about 0.14 of its potential returns per unit of risk. Marriott International is currently generating about 0.1 per unit of risk. If you would invest 4,579 in InterContinental Hotels Group on January 19, 2024 and sell it today you would earn a total of 5,223 from holding InterContinental Hotels Group or generate 114.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
InterContinental Hotels Group vs. Marriott International
Performance |
| Timeline |
| InterContinental Hotels |
| Marriott International |
InterContinental and Marriott International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InterContinental and Marriott International
The main advantage of trading using opposite InterContinental and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental 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 InterContinental Hotels Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |