Correlation Between Wyndham Hotels and One Group

Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and One Group 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 One Group 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 One Group Hospitality, you can compare the effects of market volatilities on Wyndham Hotels and One Group 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 One Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and One Group.

Diversification Opportunities for Wyndham Hotels and One Group

-0.44

Correlation Coefficient

Wyndham Hotels  One Group

Very good diversification

The 3 months correlation between Wyndham and One is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and One Group Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Group Hospitality 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 One Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Group Hospitality has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and One Group go up and down completely randomly.

Pair Corralation between Wyndham Hotels and One Group

Allowing for the 90-day total investment horizon Wyndham Hotels Resorts is expected to generate 0.32 times more return on investment than One Group. However, Wyndham Hotels Resorts is 3.14 times less risky than One Group. It trades about 0.27 of its potential returns per unit of risk. One Group Hospitality is currently generating about 0.02 per unit of risk. If you would invest  8,876  in Wyndham Hotels Resorts on September 5, 2024 and sell it today you would earn a total of  904.00  from holding Wyndham Hotels Resorts or generate 10.18% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  One Group Hospitality

Wyndham Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

One Group Hospitality

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in One Group Hospitality are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, One Group is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wyndham Hotels and One Group

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

The idea behind Wyndham Hotels Resorts and One Group Hospitality 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.