Correlation Between Marriot Vacations and Darden Restaurants

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

Diversification Opportunities for Marriot Vacations and Darden Restaurants

-0.01

Correlation Coefficient

Marriot Vacations  Darden Restaurants

Good diversification

The 3 months correlation between Marriot and Darden is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Marriot Vacations Worldwide and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Marriot Vacations i.e., Marriot Vacations and Darden Restaurants go up and down completely randomly.

Pair Corralation between Marriot Vacations and Darden Restaurants

Considering the 90-day investment horizon Marriot Vacations Worldwide is expected to generate 1.4 times more return on investment than Darden Restaurants. However, Marriot Vacations is 1.4 times more volatile than Darden Restaurants. It trades about 0.0 of its potential returns per unit of risk. Darden Restaurants is currently generating about -0.16 per unit of risk. If you would invest  9,104  in Marriot Vacations Worldwide on March 2, 2024 and sell it today you would lose (77.00) from holding Marriot Vacations Worldwide or give up 0.85% of portfolio value over 90 days.

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

Marriot Vacations Worldwide  vs.  Darden Restaurants

Marriot Vacations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marriot Vacations Worldwide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Marriot Vacations is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Darden Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darden Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Marriot Vacations and Darden Restaurants

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

The idea behind Marriot Vacations Worldwide and Darden Restaurants 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.