Correlation Between Two Harbors and MARRIOTT

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

By analyzing existing cross correlation between Two Harbors Investments and MARRIOTT OWNERSHIP RESORTS, you can compare the effects of market volatilities on Two Harbors 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 Two Harbors with a short position of MARRIOTT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and MARRIOTT.

Diversification Opportunities for Two Harbors and MARRIOTT

0.42

Correlation Coefficient

Two Harbors  MARRIOTT

Very weak diversification

The 3 months correlation between Two and MARRIOTT is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investments and MARRIOTT OWNERSHIP RESORTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT OWNERSHIP and Two Harbors 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 Two Harbors Investments 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 OWNERSHIP has no effect on the direction of Two Harbors i.e., Two Harbors and MARRIOTT go up and down completely randomly.

Pair Corralation between Two Harbors and MARRIOTT

Assuming the 90 days trading horizon Two Harbors Investments is expected to generate 0.62 times more return on investment than MARRIOTT. However, Two Harbors Investments is 1.61 times less risky than MARRIOTT. It trades about 0.03 of its potential returns per unit of risk. MARRIOTT OWNERSHIP RESORTS is currently generating about -0.05 per unit of risk. If you would invest  2,470  in Two Harbors Investments on October 26, 2024 and sell it today you would earn a total of  13.00  from holding Two Harbors Investments or generate 0.53% return on investment over 90 days.

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

Two Harbors Investments  vs.  MARRIOTT OWNERSHIP RESORTS

Two Harbors Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Two Harbors is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MARRIOTT OWNERSHIP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARRIOTT OWNERSHIP RESORTS 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 Two Harbors and MARRIOTT

The main advantage of trading using opposite Two Harbors and MARRIOTT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors 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 Two Harbors Investments and MARRIOTT OWNERSHIP RESORTS 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.