Correlation Between Wyndham Hotels and COVIVIO HOTELS

Can any of the company-specific risk be diversified away by investing in both Wyndham Hotels and COVIVIO 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 Wyndham Hotels and COVIVIO HOTELS 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 COVIVIO HOTELS INH, you can compare the effects of market volatilities on Wyndham Hotels and COVIVIO 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 Wyndham Hotels with a short position of COVIVIO HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wyndham Hotels and COVIVIO HOTELS.

Diversification Opportunities for Wyndham Hotels and COVIVIO HOTELS

0.44

Correlation Coefficient

Wyndham Hotels  COVIVIO HOTELS

Very weak diversification

The 3 months correlation between Wyndham and COVIVIO is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and COVIVIO HOTELS INH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVIVIO HOTELS INH 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 COVIVIO HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVIVIO HOTELS INH has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and COVIVIO HOTELS go up and down completely randomly.

Pair Corralation between Wyndham Hotels and COVIVIO HOTELS

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to under-perform the COVIVIO HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, Wyndham Hotels Resorts is 1.82 times less risky than COVIVIO HOTELS. The stock trades about -0.15 of its potential returns per unit of risk. The COVIVIO HOTELS INH is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,860  in COVIVIO HOTELS INH on October 14, 2024 and sell it today you would earn a total of  130.00  from holding COVIVIO HOTELS INH or generate 6.99% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  COVIVIO HOTELS INH

Wyndham Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

COVIVIO HOTELS INH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COVIVIO HOTELS INH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, COVIVIO HOTELS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wyndham Hotels and COVIVIO HOTELS

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

The idea behind Wyndham Hotels Resorts and COVIVIO HOTELS INH 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.