Correlation Between Marriot Vacations and Vail Resorts

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Can any of the company-specific risk be diversified away by investing in both Marriot Vacations and Vail Resorts 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 Marriot Vacations and Vail Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marriot Vacations Worldwide and Vail Resorts, you can compare the effects of market volatilities on Marriot Vacations and Vail Resorts 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 Marriot Vacations with a short position of Vail Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marriot Vacations and Vail Resorts.

Diversification Opportunities for Marriot Vacations and Vail Resorts

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Marriot and Vail is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Marriot Vacations Worldwide and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts and Marriot Vacations 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 Marriot Vacations Worldwide are associated (or correlated) with Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Marriot Vacations i.e., Marriot Vacations and Vail Resorts go up and down completely randomly.

Pair Corralation between Marriot Vacations and Vail Resorts

Considering the 90-day investment horizon Marriot Vacations Worldwide is expected to generate 1.26 times more return on investment than Vail Resorts. However, Marriot Vacations is 1.26 times more volatile than Vail Resorts. It trades about 0.03 of its potential returns per unit of risk. Vail Resorts is currently generating about -0.04 per unit of risk. If you would invest  8,013  in Marriot Vacations Worldwide on November 3, 2024 and sell it today you would earn a total of  664.00  from holding Marriot Vacations Worldwide or generate 8.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Marriot Vacations Worldwide  vs.  Vail Resorts

 Performance 
       Timeline  
Marriot Vacations 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Marriot Vacations Worldwide are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Marriot Vacations exhibited solid returns over the last few months and may actually be approaching a breakup point.
Vail Resorts 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Vail Resorts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vail Resorts is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Marriot Vacations and Vail Resorts Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Marriot Vacations and Vail Resorts

The main advantage of trading using opposite Marriot Vacations and Vail Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marriot Vacations position performs unexpectedly, Vail Resorts 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 Vail Resorts will offset losses from the drop in Vail Resorts' long position.
The idea behind Marriot Vacations Worldwide and Vail Resorts 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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