Correlation Between Marriott International and Sanwire

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

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

Diversification Opportunities for Marriott International and Sanwire

-0.69

Correlation Coefficient

Marriott International  Sanwire

Excellent diversification

The 3 months correlation between Marriott and Sanwire is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Marriott International and Sanwire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanwire 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 Sanwire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanwire has no effect on the direction of Marriott International i.e., Marriott International and Sanwire go up and down completely randomly.

Pair Corralation between Marriott International and Sanwire

Considering the 90-day investment horizon Marriott International is expected to generate 1.68 times less return on investment than Sanwire. But when comparing it to its historical volatility, Marriott International is 10.98 times less risky than Sanwire. It trades about 0.17 of its potential returns per unit of risk. Sanwire is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.06  in Sanwire on October 1, 2024 and sell it today you would lose (0.02) from holding Sanwire or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Marriott International  vs.  Sanwire

Marriott International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Marriott International reported solid returns over the last few months and may actually be approaching a breakup point.

Sanwire

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanwire are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Sanwire reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marriott International and Sanwire

The main advantage of trading using opposite Marriott International and Sanwire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marriott International position performs unexpectedly, Sanwire 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 Sanwire will offset losses from the drop in Sanwire's long position.

The idea behind Marriott International and Sanwire 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.