Correlation Between Vail Resorts and Marriot Vacations

Can any of the company-specific risk be diversified away by investing in both Vail 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 Vail 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 Vail Resorts and Marriot Vacations Worldwide, you can compare the effects of market volatilities on Vail 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 Vail Resorts with a short position of Marriot Vacations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vail Resorts and Marriot Vacations.

Diversification Opportunities for Vail Resorts and Marriot Vacations

0.24

Correlation Coefficient

Vail Resorts  Marriot Vacations

Modest diversification

The 3 months correlation between Vail and Marriot is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts and Marriot Vacations Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriot Vacations and Vail 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 Vail Resorts 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 Vail Resorts i.e., Vail Resorts and Marriot Vacations go up and down completely randomly.

Pair Corralation between Vail Resorts and Marriot Vacations

Considering the 90-day investment horizon Vail Resorts is expected to under-perform the Marriot Vacations. But the stock apears to be less risky and, when comparing its historical volatility, Vail Resorts is 1.54 times less risky than Marriot Vacations. The stock trades about 0.0 of its potential returns per unit of risk. The Marriot Vacations Worldwide is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,247  in Marriot Vacations Worldwide on September 2, 2024 and sell it today you would earn a total of  2,678  from holding Marriot Vacations Worldwide or generate 36.95% return on investment over 90 days.

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

Vail Resorts  vs.  Marriot Vacations Worldwide

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. 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

Risk-Adjusted Performance

15 of 100

Good

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 Vail Resorts and Marriot Vacations

The main advantage of trading using opposite Vail Resorts and Marriot Vacations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vail 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 Vail Resorts 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.