Correlation Between Marriott International and GreenTree Hospitality

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

By analyzing existing cross correlation between Marriott International and GreenTree Hospitality Group, you can compare the effects of market volatilities on Marriott International and GreenTree Hospitality 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 GreenTree Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marriott International and GreenTree Hospitality.

Diversification Opportunities for Marriott International and GreenTree Hospitality

0.38

Correlation Coefficient

Marriott International  GreenTree Hospitality

Weak diversification

The 3 months correlation between Marriott and GreenTree is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and GreenTree Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenTree Hospitality 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 GreenTree Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenTree Hospitality has no effect on the direction of Marriott International i.e., Marriott International and GreenTree Hospitality go up and down completely randomly.

Pair Corralation between Marriott International and GreenTree Hospitality

Considering the 90-day investment horizon Marriott International is expected to under-perform the GreenTree Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Marriott International is 2.36 times less risky than GreenTree Hospitality. The stock trades about -0.21 of its potential returns per unit of risk. The GreenTree Hospitality Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  311.00  in GreenTree Hospitality Group on February 3, 2024 and sell it today you would lose (5.00) from holding GreenTree Hospitality Group or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Marriott International  vs.  GreenTree Hospitality Group

Marriott International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marriott International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Marriott International is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

GreenTree Hospitality

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GreenTree Hospitality Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, GreenTree Hospitality is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Marriott International and GreenTree Hospitality

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

The idea behind Marriott International and GreenTree Hospitality Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.