Correlation Between MARRIOTT and Tenaris SA

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

By analyzing existing cross correlation between MARRIOTT INTERNATIONAL INC and Tenaris SA ADR, you can compare the effects of market volatilities on MARRIOTT and Tenaris SA 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 with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARRIOTT and Tenaris SA.

Diversification Opportunities for MARRIOTT and Tenaris SA

-0.5

Correlation Coefficient

MARRIOTT  Tenaris SA

Very good diversification

The 3 months correlation between MARRIOTT and Tenaris is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding MARRIOTT INTERNATIONAL INC and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR and MARRIOTT 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 INC are associated (or correlated) with Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA ADR has no effect on the direction of MARRIOTT i.e., MARRIOTT and Tenaris SA go up and down completely randomly.

Pair Corralation between MARRIOTT and Tenaris SA

Assuming the 90 days trading horizon MARRIOTT INTERNATIONAL INC is expected to under-perform the Tenaris SA. But the bond apears to be less risky and, when comparing its historical volatility, MARRIOTT INTERNATIONAL INC is 3.35 times less risky than Tenaris SA. The bond trades about -0.2 of its potential returns per unit of risk. The Tenaris SA ADR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,021  in Tenaris SA ADR on September 24, 2024 and sell it today you would earn a total of  698.00  from holding Tenaris SA ADR or generate 23.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MARRIOTT INTERNATIONAL INC  vs.  Tenaris SA ADR

MARRIOTT INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Tenaris SA ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MARRIOTT and Tenaris SA

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

The idea behind MARRIOTT INTERNATIONAL INC and Tenaris SA ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.