Correlation Between Playa Hotels and Marriot Vacations

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

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

Diversification Opportunities for Playa Hotels and Marriot Vacations

0.84

Correlation Coefficient

Playa Hotels  Marriot Vacations

Very poor diversification

The 3 months correlation between Playa and Marriot is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels 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 Playa Hotels 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 Playa Hotels 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 Playa Hotels i.e., Playa Hotels and Marriot Vacations go up and down completely randomly.

Pair Corralation between Playa Hotels and Marriot Vacations

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 0.67 times more return on investment than Marriot Vacations. However, Playa Hotels Resorts is 1.5 times less risky than Marriot Vacations. It trades about -0.12 of its potential returns per unit of risk. Marriot Vacations Worldwide is currently generating about -0.13 per unit of risk. If you would invest  956.00  in Playa Hotels Resorts on February 2, 2024 and sell it today you would lose (35.00) from holding Playa Hotels Resorts or give up 3.66% of portfolio value over 90 days.

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

Playa Hotels Resorts  vs.  Marriot Vacations Worldwide

Playa Hotels Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Playa Hotels may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Marriot Vacations

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marriot Vacations Worldwide are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Marriot Vacations exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and Marriot Vacations

The main advantage of trading using opposite Playa Hotels and Marriot Vacations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels 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 Playa Hotels 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.