Correlation Between Home Depot and Marriott Vacations
Can any of the company-specific risk be diversified away by investing in both Home Depot 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 Home Depot and Marriott Vacations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and Marriott Vacations Worldwide, you can compare the effects of market volatilities on Home Depot 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 Home Depot with a short position of Marriott Vacations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Marriott Vacations.
Diversification Opportunities for Home Depot and Marriott Vacations
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Marriott is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Marriott Vacations Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott Vacations and Home Depot 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 The Home Depot 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 Home Depot i.e., Home Depot and Marriott Vacations go up and down completely randomly.
Pair Corralation between Home Depot and Marriott Vacations
Assuming the 90 days trading horizon Home Depot is expected to generate 2.3 times less return on investment than Marriott Vacations. But when comparing it to its historical volatility, The Home Depot is 1.86 times less risky than Marriott Vacations. It trades about 0.08 of its potential returns per unit of risk. Marriott Vacations Worldwide is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,136 in Marriott Vacations Worldwide on October 27, 2024 and sell it today you would earn a total of 1,064 from holding Marriott Vacations Worldwide or generate 14.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
The Home Depot vs. Marriott Vacations Worldwide
Performance |
Timeline |
Home Depot |
Marriott Vacations |
Home Depot and Marriott Vacations Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Marriott Vacations
The main advantage of trading using opposite Home Depot and Marriott Vacations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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.Home Depot vs. HANOVER INSURANCE | Home Depot vs. Autohome ADR | Home Depot vs. DFS Furniture PLC | Home Depot vs. HAVERTY FURNITURE A |
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Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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