Correlation Between Wyndham Hotels and Burlington Stores

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

Diversification Opportunities for Wyndham Hotels and Burlington Stores

0.87

Correlation Coefficient

Wyndham Hotels  Burlington Stores

Very poor diversification

The 3 months correlation between Wyndham and Burlington is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores 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 Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Burlington Stores go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Burlington Stores

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to generate 1.08 times more return on investment than Burlington Stores. However, Wyndham Hotels is 1.08 times more volatile than Burlington Stores. It trades about 0.15 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.03 per unit of risk. If you would invest  9,214  in Wyndham Hotels Resorts on October 5, 2024 and sell it today you would earn a total of  436.00  from holding Wyndham Hotels Resorts or generate 4.73% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  Burlington Stores

Wyndham Hotels Resorts

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Wyndham Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Burlington Stores

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Burlington Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wyndham Hotels and Burlington Stores

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

The idea behind Wyndham Hotels Resorts and Burlington Stores 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.