Correlation Between Melco Resorts and Marriot Vacations

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

By analyzing existing cross correlation between Melco Resorts Entertainment and Marriot Vacations Worldwide, you can compare the effects of market volatilities on Melco Resorts and Marriot Vacations 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 Melco Resorts with a short position of Marriot Vacations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Marriot Vacations.

Diversification Opportunities for Melco Resorts and Marriot Vacations

-0.19

Correlation Coefficient

Melco Resorts  Marriot Vacations

Good diversification

The 3 months correlation between Melco and Marriot is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Marriot Vacations Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriot Vacations and Melco Resorts 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 Melco Resorts Entertainment are associated (or correlated) with Marriot Vacations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marriot Vacations has no effect on the direction of Melco Resorts i.e., Melco Resorts and Marriot Vacations go up and down completely randomly.

Pair Corralation between Melco Resorts and Marriot Vacations

Given the investment horizon of 90 days Melco Resorts is expected to generate 1.24 times less return on investment than Marriot Vacations. In addition to that, Melco Resorts is 1.31 times more volatile than Marriot Vacations Worldwide. It trades about 0.12 of its total potential returns per unit of risk. Marriot Vacations Worldwide is currently generating about 0.19 per unit of volatility. If you would invest  7,063  in Marriot Vacations Worldwide on September 12, 2024 and sell it today you would earn a total of  2,487  from holding Marriot Vacations Worldwide or generate 35.21% return on investment over 90 days.

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

Melco Resorts Entertainment  vs.  Marriot Vacations Worldwide

Melco Resorts Entert

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melco Resorts Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Melco Resorts displayed solid returns over the last few months and may actually be approaching a breakup point.

Marriot Vacations

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marriot Vacations Worldwide are ranked lower than 15 (%) 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.

Pair Trading with Melco Resorts and Marriot Vacations

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

The idea behind Melco Resorts Entertainment and Marriot Vacations Worldwide 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.