Correlation Between Wyndham Hotels and CHINA WATER

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

By analyzing existing cross correlation between Wyndham Hotels Resorts and CHINA WATER IGR, you can compare the effects of market volatilities on Wyndham Hotels and CHINA WATER 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 Wyndham Hotels with a short position of CHINA WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and CHINA WATER.

Diversification Opportunities for Wyndham Hotels and CHINA WATER

-0.91

Correlation Coefficient

Wyndham Hotels  CHINA WATER

Pay attention - limited upside

The 3 months correlation between Wyndham and CHINA is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and CHINA WATER IGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA WATER IGR and Wyndham Hotels 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 Wyndham Hotels Resorts are associated (or correlated) with CHINA WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA WATER IGR has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and CHINA WATER go up and down completely randomly.

Pair Corralation between Wyndham Hotels and CHINA WATER

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to generate 0.2 times more return on investment than CHINA WATER. However, Wyndham Hotels Resorts is 5.02 times less risky than CHINA WATER. It trades about 0.23 of its potential returns per unit of risk. CHINA WATER IGR is currently generating about -0.12 per unit of risk. If you would invest  7,072  in Wyndham Hotels Resorts on September 25, 2024 and sell it today you would earn a total of  2,478  from holding Wyndham Hotels Resorts or generate 35.04% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  CHINA WATER IGR

Wyndham Hotels Resorts

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA WATER IGR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA WATER IGR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wyndham Hotels and CHINA WATER

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

The idea behind Wyndham Hotels Resorts and CHINA WATER IGR 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.

Check out your portfolio center.

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.