Correlation Between Wyndham Hotels and Toyota

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

Diversification Opportunities for Wyndham Hotels and Toyota

-0.02

Correlation Coefficient

Wyndham Hotels  Toyota

Good diversification

The 3 months correlation between Wyndham and Toyota is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Toyota go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Toyota

Assuming the 90 days trading horizon Wyndham Hotels Resorts is expected to generate 0.55 times more return on investment than Toyota. However, Wyndham Hotels Resorts is 1.81 times less risky than Toyota. It trades about 0.14 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.06 per unit of risk. If you would invest  9,770  in Wyndham Hotels Resorts on December 2, 2024 and sell it today you would earn a total of  1,003  from holding Wyndham Hotels Resorts or generate 10.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Wyndham Hotels Resorts  vs.  Toyota Motor Corp

Wyndham Hotels Resorts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wyndham Hotels may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Toyota Motor Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wyndham Hotels and Toyota

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

The idea behind Wyndham Hotels Resorts and Toyota Motor Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.