Correlation Between Visa and Marriott International
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Marriott International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Marriott International, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Marriott International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Marriott International.
Diversification Opportunities for Visa and Marriott International
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Marriott is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Visa 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 Visa Class A 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 Visa i.e., Visa and Marriott International go up and down completely randomly.
Pair Corralation between Visa and Marriott International
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.63 times more return on investment than Marriott International. However, Visa Class A is 1.58 times less risky than Marriott International. It trades about -0.41 of its potential returns per unit of risk. Marriott International is currently generating about -0.26 per unit of risk. If you would invest 28,928 in Visa Class A on January 20, 2024 and sell it today you would lose (1,950) from holding Visa Class A or give up 6.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Marriott International
Performance |
| Timeline |
| Visa Class A |
| Marriott International |
Visa and Marriott International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Marriott International
The main advantage of trading using opposite Visa and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
| Marriott International vs. Yatra Online | Marriott International vs. Despegar Corp | Marriott International vs. Mondee Holdings | Marriott International vs. MakeMyTrip Limited |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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