Correlation Between Wyndham Hotels and ENSTAR GROUP

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

Diversification Opportunities for Wyndham Hotels and ENSTAR GROUP

0.09

Correlation Coefficient

Wyndham Hotels  ENSTAR GROUP

Significant diversification

The 3 months correlation between Wyndham and ENSTAR is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and ENSTAR GROUP LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENSTAR GROUP LTD 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 ENSTAR GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENSTAR GROUP LTD has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and ENSTAR GROUP go up and down completely randomly.

Pair Corralation between Wyndham Hotels and ENSTAR GROUP

Assuming the 90 days horizon Wyndham Hotels is expected to generate 1.11 times less return on investment than ENSTAR GROUP. But when comparing it to its historical volatility, Wyndham Hotels Resorts is 1.09 times less risky than ENSTAR GROUP. It trades about 0.32 of its potential returns per unit of risk. ENSTAR GROUP LTD is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  30,200  in ENSTAR GROUP LTD on October 22, 2024 and sell it today you would earn a total of  1,400  from holding ENSTAR GROUP LTD or generate 4.64% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  ENSTAR GROUP LTD

Wyndham Hotels Resorts

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

ENSTAR GROUP LTD

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENSTAR GROUP LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ENSTAR GROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wyndham Hotels and ENSTAR GROUP

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

The idea behind Wyndham Hotels Resorts and ENSTAR GROUP LTD 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.