Correlation Between Hilton Worldwide and Marriott International

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

By analyzing existing cross correlation between Hilton Worldwide Holdings and Marriott International, you can compare the effects of market volatilities on Hilton Worldwide 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 Hilton Worldwide with a short position of Marriott International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and Marriott International.

Diversification Opportunities for Hilton Worldwide and Marriott International

0.85

Correlation Coefficient

Hilton Worldwide  Marriott International

Very poor diversification

The 3 months correlation between Hilton and Marriott is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and Marriott International go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Marriott International

Considering the 90-day investment horizon Hilton Worldwide is expected to generate 1.15 times less return on investment than Marriott International. But when comparing it to its historical volatility, Hilton Worldwide Holdings is 1.13 times less risky than Marriott International. It trades about 0.09 of its potential returns per unit of risk. Marriott International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,787  in Marriott International on January 24, 2024 and sell it today you would earn a total of  7,182  from holding Marriott International or generate 42.78% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Marriott International

Hilton Worldwide Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Marriott International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Hilton Worldwide and Marriott International

The main advantage of trading using opposite Hilton Worldwide and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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.

The idea behind Hilton Worldwide Holdings and Marriott International 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.