Correlation Between Citigroup and Marriott Vacations

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

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

Diversification Opportunities for Citigroup and Marriott Vacations

0.46

Correlation Coefficient

Citigroup  Marriott Vacations

Very weak diversification

The 3 months correlation between Citigroup and Marriott is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Marriott Vacations Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott Vacations and Citigroup 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 Citigroup are associated (or correlated) with Marriott Vacations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marriott Vacations has no effect on the direction of Citigroup i.e., Citigroup and Marriott Vacations go up and down completely randomly.

Pair Corralation between Citigroup and Marriott Vacations

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.74 times more return on investment than Marriott Vacations. However, Citigroup is 1.36 times less risky than Marriott Vacations. It trades about 0.25 of its potential returns per unit of risk. Marriott Vacations Worldwide is currently generating about 0.14 per unit of risk. If you would invest  6,245  in Citigroup on October 24, 2024 and sell it today you would earn a total of  1,924  from holding Citigroup or generate 30.81% return on investment over 90 days.

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

Citigroup  vs.  Marriott Vacations Worldwide

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Marriott Vacations

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott Vacations Worldwide are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Marriott Vacations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Marriott Vacations

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

The idea behind Citigroup and Marriott 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.