Correlation Between Beazer Homes and Wyndham Hotels

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

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

Diversification Opportunities for Beazer Homes and Wyndham Hotels

0.46

Correlation Coefficient

Beazer Homes  Wyndham Hotels

Very weak diversification

The 3 months correlation between Beazer and Wyndham is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Wyndham Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Hotels Resorts and Beazer Homes 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 Beazer Homes USA are associated (or correlated) with Wyndham Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Hotels Resorts has no effect on the direction of Beazer Homes i.e., Beazer Homes and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Beazer Homes and Wyndham Hotels

Assuming the 90 days trading horizon Beazer Homes USA is expected to under-perform the Wyndham Hotels. In addition to that, Beazer Homes is 1.73 times more volatile than Wyndham Hotels Resorts. It trades about -0.04 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.24 per unit of volatility. If you would invest  7,831  in Wyndham Hotels Resorts on September 15, 2024 and sell it today you would earn a total of  2,512  from holding Wyndham Hotels Resorts or generate 32.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.08%
Values	Daily Returns

Beazer Homes USA  vs.  Wyndham Hotels Resorts

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Wyndham Hotels Resorts

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wyndham Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Wyndham Hotels

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

The idea behind Beazer Homes USA and Wyndham Hotels 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..