Correlation Between MGM Resorts and Marriott Vacations

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

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

Diversification Opportunities for MGM Resorts and Marriott Vacations

-0.37

Correlation Coefficient

MGM Resorts  Marriott Vacations

Very good diversification

The 3 months correlation between MGM and Marriott is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Marriott Vacations Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott Vacations and MGM Resorts 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 MGM Resorts International 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 MGM Resorts i.e., MGM Resorts and Marriott Vacations go up and down completely randomly.

Pair Corralation between MGM Resorts and Marriott Vacations

Assuming the 90 days horizon MGM Resorts International is expected to generate 1.02 times more return on investment than Marriott Vacations. However, MGM Resorts is 1.02 times more volatile than Marriott Vacations Worldwide. It trades about -0.19 of its potential returns per unit of risk. Marriott Vacations Worldwide is currently generating about -0.3 per unit of risk. If you would invest  3,462  in MGM Resorts International on October 8, 2024 and sell it today you would lose (173.00) from holding MGM Resorts International or give up 5.0% of portfolio value over 90 days.

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

MGM Resorts International  vs.  Marriott Vacations Worldwide

MGM Resorts International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM Resorts International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Marriott Vacations

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott Vacations Worldwide are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Marriott Vacations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGM Resorts and Marriott Vacations

The main advantage of trading using opposite MGM Resorts and Marriott Vacations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM Resorts 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 MGM Resorts International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.