Correlation Between Choice Hotels and Marriott International
Can any of the company-specific risk be diversified away by investing in both Choice Hotels 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 Choice Hotels and Marriott International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Hotels International and Marriott International, you can compare the effects of market volatilities on Choice Hotels 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 Choice Hotels with a short position of Marriott International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Marriott International.
Diversification Opportunities for Choice Hotels and Marriott International
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Choice and Marriott is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Choice Hotels 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 Choice Hotels International 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 Choice Hotels i.e., Choice Hotels and Marriott International go up and down completely randomly.
Pair Corralation between Choice Hotels and Marriott International
Considering the 90-day investment horizon Choice Hotels is expected to generate 1.37 times less return on investment than Marriott International. But when comparing it to its historical volatility, Choice Hotels International is 1.66 times less risky than Marriott International. It trades about 0.29 of its potential returns per unit of risk. Marriott International is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 26,196 in Marriott International on August 27, 2024 and sell it today you would earn a total of 2,233 from holding Marriott International or generate 8.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Marriott International
Performance |
| Timeline |
| Choice Hotels Intern |
| Marriott International |
Choice Hotels and Marriott International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Marriott International
The main advantage of trading using opposite Choice Hotels and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels 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.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
| Marriott International vs. Hyatt Hotels | Marriott International vs. InterContinental Hotels Group | Marriott International vs. Choice Hotels International | Marriott International vs. Wyndham Hotels Resorts |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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