Correlation Between Wyndham Hotels and G5 Entertainment

Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and G5 Entertainment 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 G5 Entertainment 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 G5 Entertainment AB, you can compare the effects of market volatilities on Wyndham Hotels and G5 Entertainment 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 G5 Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and G5 Entertainment.

Diversification Opportunities for Wyndham Hotels and G5 Entertainment

0.77

Correlation Coefficient

Wyndham Hotels  G5 Entertainment

Poor diversification

The 3 months correlation between Wyndham and 0QUS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and G5 Entertainment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G5 Entertainment 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 G5 Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G5 Entertainment has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and G5 Entertainment go up and down completely randomly.

Pair Corralation between Wyndham Hotels and G5 Entertainment

Assuming the 90 days trading horizon Wyndham Hotels Resorts is expected to generate 0.88 times more return on investment than G5 Entertainment. However, Wyndham Hotels Resorts is 1.14 times less risky than G5 Entertainment. It trades about 0.2 of its potential returns per unit of risk. G5 Entertainment AB is currently generating about 0.06 per unit of risk. If you would invest  7,767  in Wyndham Hotels Resorts on September 2, 2024 and sell it today you would earn a total of  2,019  from holding Wyndham Hotels Resorts or generate 25.99% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  G5 Entertainment AB

Wyndham Hotels Resorts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Wyndham Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

G5 Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in G5 Entertainment AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, G5 Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wyndham Hotels and G5 Entertainment

The main advantage of trading using opposite Wyndham Hotels and G5 Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wyndham Hotels position performs unexpectedly, G5 Entertainment 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 G5 Entertainment will offset losses from the drop in G5 Entertainment's long position.

The idea behind Wyndham Hotels Resorts and G5 Entertainment AB 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.