Correlation Between Major Drilling and MARRIOTT

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

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

Diversification Opportunities for Major Drilling and MARRIOTT

0.68

Correlation Coefficient

Major Drilling  MARRIOTT

Poor diversification

The 3 months correlation between Major and MARRIOTT is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and MARRIOTT INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT INTL INC and Major Drilling 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 Major Drilling Group 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 INTL INC has no effect on the direction of Major Drilling i.e., Major Drilling and MARRIOTT go up and down completely randomly.

Pair Corralation between Major Drilling and MARRIOTT

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the MARRIOTT. In addition to that, Major Drilling is 1.85 times more volatile than MARRIOTT INTL INC. It trades about -0.35 of its total potential returns per unit of risk. MARRIOTT INTL INC is currently generating about -0.29 per unit of volatility. If you would invest  9,968  in MARRIOTT INTL INC on October 8, 2024 and sell it today you would lose (360.00) from holding MARRIOTT INTL INC or give up 3.61% of portfolio value over 90 days.

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

Major Drilling Group  vs.  MARRIOTT INTL INC

Major Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Major Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MARRIOTT INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT INTL 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Major Drilling and MARRIOTT

The main advantage of trading using opposite Major Drilling and MARRIOTT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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 Major Drilling Group and MARRIOTT INTL 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.