Correlation Between MI Homes and MARRIOTT

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

By analyzing existing cross correlation between MI Homes and MARRIOTT INTERNATIONAL INC, you can compare the effects of market volatilities on MI Homes and MARRIOTT 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 MI Homes with a short position of MARRIOTT. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and MARRIOTT.

Diversification Opportunities for MI Homes and MARRIOTT

0.23

Correlation Coefficient

MI Homes  MARRIOTT

Modest diversification

The 3 months correlation between MHO and MARRIOTT is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and MARRIOTT INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT INTERNATIONAL and MI 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 MI Homes are associated (or correlated) with MARRIOTT. 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 MI Homes i.e., MI Homes and MARRIOTT go up and down completely randomly.

Pair Corralation between MI Homes and MARRIOTT

Considering the 90-day investment horizon MI Homes is expected to generate 3.72 times more return on investment than MARRIOTT. However, MI Homes is 3.72 times more volatile than MARRIOTT INTERNATIONAL INC. It trades about 0.09 of its potential returns per unit of risk. MARRIOTT INTERNATIONAL INC is currently generating about 0.01 per unit of risk. If you would invest  5,728  in MI Homes on October 5, 2024 and sell it today you would earn a total of  7,341  from holding MI Homes or generate 128.16% return on investment over 90 days.

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

MI Homes  vs.  MARRIOTT INTERNATIONAL INC

MI Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

MARRIOTT INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MI Homes and MARRIOTT

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

The idea behind MI Homes and MARRIOTT INTERNATIONAL INC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.