Correlation Between LANDSEA HOMES and Marriott International

Can any of the company-specific risk be diversified away by investing in both LANDSEA HOMES and Marriott International 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 LANDSEA HOMES and Marriott International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LANDSEA HOMES P and Marriott International, you can compare the effects of market volatilities on LANDSEA HOMES and Marriott International 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 LANDSEA HOMES with a short position of Marriott International. Check out your portfolio center. Please also check ongoing floating volatility patterns of LANDSEA HOMES and Marriott International.

Diversification Opportunities for LANDSEA HOMES and Marriott International

-0.26

Correlation Coefficient

LANDSEA HOMES  Marriott International

Very good diversification

The 3 months correlation between LANDSEA and Marriott is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and LANDSEA HOMES 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 LANDSEA HOMES P are associated (or correlated) with Marriott International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marriott International has no effect on the direction of LANDSEA HOMES i.e., LANDSEA HOMES and Marriott International go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and Marriott International

Assuming the 90 days horizon LANDSEA HOMES P is expected to under-perform the Marriott International. In addition to that, LANDSEA HOMES is 2.19 times more volatile than Marriott International. It trades about -0.04 of its total potential returns per unit of risk. Marriott International is currently generating about 0.08 per unit of volatility. If you would invest  20,259  in Marriott International on October 10, 2024 and sell it today you would earn a total of  6,066  from holding Marriott International or generate 29.94% return on investment over 90 days.

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

LANDSEA HOMES P  vs.  Marriott International

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LANDSEA HOMES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Marriott International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Marriott International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LANDSEA HOMES and Marriott International

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

The idea behind LANDSEA HOMES P and Marriott International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.