Correlation Between Marriott International and HP
Can any of the company-specific risk be diversified away by investing in both Marriott International and HP 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 HP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marriott International and HP Inc, you can compare the effects of market volatilities on Marriott International and HP 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 HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marriott International and HP.
Diversification Opportunities for Marriott International and HP
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Marriott and HP is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Marriott International i.e., Marriott International and HP go up and down completely randomly.
Pair Corralation between Marriott International and HP
Considering the 90-day investment horizon Marriott International is expected to generate 0.97 times more return on investment than HP. However, Marriott International is 1.04 times less risky than HP. It trades about 0.15 of its potential returns per unit of risk. HP Inc is currently generating about 0.06 per unit of risk. If you would invest 18,817 in Marriott International on January 19, 2024 and sell it today you would earn a total of 4,813 from holding Marriott International or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marriott International vs. HP Inc
Performance |
| Timeline |
| Marriott International |
| HP Inc |
Marriott International and HP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marriott International and HP
The main advantage of trading using opposite Marriott International and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marriott International position performs unexpectedly, HP 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 HP will offset losses from the drop in HP's long position.The idea behind Marriott International and HP Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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