Correlation Between Marriot Vacations and Norwegian Cruise

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

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

Diversification Opportunities for Marriot Vacations and Norwegian Cruise

0.93

Correlation Coefficient

Marriot Vacations  Norwegian Cruise

Almost no diversification

The 3 months correlation between Marriot and Norwegian is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Marriot Vacations Worldwide and Norwegian Cruise Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Cruise Line and Marriot Vacations 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 Marriot Vacations Worldwide are associated (or correlated) with Norwegian Cruise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Cruise Line has no effect on the direction of Marriot Vacations i.e., Marriot Vacations and Norwegian Cruise go up and down completely randomly.

Pair Corralation between Marriot Vacations and Norwegian Cruise

Considering the 90-day investment horizon Marriot Vacations Worldwide is expected to generate 0.87 times more return on investment than Norwegian Cruise. However, Marriot Vacations Worldwide is 1.15 times less risky than Norwegian Cruise. It trades about -0.18 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.16 per unit of risk. If you would invest  8,796  in Marriot Vacations Worldwide on December 30, 2024 and sell it today you would lose (2,181) from holding Marriot Vacations Worldwide or give up 24.8% of portfolio value over 90 days.

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

Marriot Vacations Worldwide  vs.  Norwegian Cruise Line

Marriot Vacations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marriot Vacations Worldwide 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Norwegian Cruise Line

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norwegian Cruise Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Marriot Vacations and Norwegian Cruise

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

The idea behind Marriot Vacations Worldwide and Norwegian Cruise Line 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.