Correlation Between New Residential and Wyndham Hotels

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

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

Diversification Opportunities for New Residential and Wyndham Hotels

0.28

Correlation Coefficient

New Residential  Wyndham Hotels

Modest diversification

The 3 months correlation between New and Wyndham is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment 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 New Residential 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 New Residential Investment 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 New Residential i.e., New Residential and Wyndham Hotels go up and down completely randomly.

Pair Corralation between New Residential and Wyndham Hotels

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.76 times more return on investment than Wyndham Hotels. However, New Residential Investment is 1.32 times less risky than Wyndham Hotels. It trades about 0.14 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about -0.09 per unit of risk. If you would invest  1,058  in New Residential Investment on December 22, 2024 and sell it today you would earn a total of  112.00  from holding New Residential Investment or generate 10.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

New Residential Investment  vs.  Wyndham Hotels Resorts

New Residential Inve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Wyndham Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wyndham Hotels Resorts 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.

Pair Trading with New Residential and Wyndham Hotels

The main advantage of trading using opposite New Residential and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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 New Residential Investment 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.