Correlation Between Wyndham Hotels and Cheniere Energy

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

Diversification Opportunities for Wyndham Hotels and Cheniere Energy

0.9

Correlation Coefficient

Wyndham Hotels  Cheniere Energy

Almost no diversification

The 3 months correlation between Wyndham and Cheniere is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Cheniere Energy go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Cheniere Energy

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to generate 1.14 times more return on investment than Cheniere Energy. However, Wyndham Hotels is 1.14 times more volatile than Cheniere Energy. It trades about 0.27 of its potential returns per unit of risk. Cheniere Energy is currently generating about 0.21 per unit of risk. If you would invest  6,973  in Wyndham Hotels Resorts on October 1, 2024 and sell it today you would earn a total of  2,727  from holding Wyndham Hotels Resorts or generate 39.11% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  Cheniere Energy

Wyndham Hotels Resorts

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 20 (%) 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.

Cheniere Energy

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Wyndham Hotels and Cheniere Energy

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

The idea behind Wyndham Hotels Resorts and Cheniere Energy 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.