Correlation Between Marriott International and McDonalds
Can any of the company-specific risk be diversified away by investing in both Marriott International and McDonalds 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 International and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marriott International and McDonalds, you can compare the effects of market volatilities on Marriott International and McDonalds 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 International with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marriott International and McDonalds.
Diversification Opportunities for Marriott International and McDonalds
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Marriott and McDonalds is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Marriott International 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 are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Marriott International i.e., Marriott International and McDonalds go up and down completely randomly.
Pair Corralation between Marriott International and McDonalds
Considering the 90-day investment horizon Marriott International is expected to under-perform the McDonalds. In addition to that, Marriott International is 1.55 times more volatile than McDonalds. It trades about -0.1 of its total potential returns per unit of risk. McDonalds is currently generating about -0.03 per unit of volatility. If you would invest 27,862 in McDonalds on January 25, 2024 and sell it today you would lose (187.00) from holding McDonalds or give up 0.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marriott International vs. McDonalds
Performance |
| Timeline |
| Marriott International |
| McDonalds |
Marriott International and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marriott International and McDonalds
The main advantage of trading using opposite Marriott International and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marriott International position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' long position.| Marriott International vs. Hyatt Hotels | Marriott International vs. InterContinental Hotels Group | Marriott International vs. Choice Hotels International | Marriott International vs. Wyndham Hotels Resorts |
| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |