Correlation Between IShares Govt and Marriott International

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

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

Diversification Opportunities for IShares Govt and Marriott International

0.19

Correlation Coefficient

IShares Govt  Marriott International

Average diversification

The 3 months correlation between IShares and Marriott is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and IShares Govt 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 iShares Govt Bond 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 IShares Govt i.e., IShares Govt and Marriott International go up and down completely randomly.

Pair Corralation between IShares Govt and Marriott International

Assuming the 90 days trading horizon IShares Govt is expected to generate 11.01 times less return on investment than Marriott International. But when comparing it to its historical volatility, iShares Govt Bond is 3.81 times less risky than Marriott International. It trades about 0.11 of its potential returns per unit of risk. Marriott International is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  20,626  in Marriott International on September 7, 2024 and sell it today you would earn a total of  7,154  from holding Marriott International or generate 34.68% return on investment over 90 days.

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

iShares Govt Bond  vs.  Marriott International

iShares Govt Bond

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Govt Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Marriott International

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Marriott International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Govt and Marriott International

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

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..