Correlation Between Light Wonder and Marriott International

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

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

Diversification Opportunities for Light Wonder and Marriott International

-0.54

Correlation Coefficient

Light Wonder  Marriott International

Excellent diversification

The 3 months correlation between Light and Marriott is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International and Light Wonder 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 Light Wonder 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 Light Wonder i.e., Light Wonder and Marriott International go up and down completely randomly.

Pair Corralation between Light Wonder and Marriott International

Considering the 90-day investment horizon Light Wonder is expected to generate 1.29 times less return on investment than Marriott International. In addition to that, Light Wonder is 1.47 times more volatile than Marriott International. It trades about 0.05 of its total potential returns per unit of risk. Marriott International is currently generating about 0.09 per unit of volatility. If you would invest  15,611  in Marriott International on September 4, 2024 and sell it today you would earn a total of  13,013  from holding Marriott International or generate 83.36% return on investment over 90 days.

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

Light Wonder  vs.  Marriott International

Light Wonder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Wonder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Light Wonder is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Marriott International

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Marriott International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Light Wonder and Marriott International

The main advantage of trading using opposite Light Wonder and Marriott International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Wonder 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 Light Wonder 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.