Correlation Between Wyndham Hotels and COSTCO WHOLESALE

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

Diversification Opportunities for Wyndham Hotels and COSTCO WHOLESALE

0.85

Correlation Coefficient

Wyndham Hotels  COSTCO WHOLESALE

Very poor diversification

The 3 months correlation between Wyndham and COSTCO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between Wyndham Hotels and COSTCO WHOLESALE

Assuming the 90 days horizon Wyndham Hotels is expected to generate 1.49 times less return on investment than COSTCO WHOLESALE. In addition to that, Wyndham Hotels is 1.04 times more volatile than COSTCO WHOLESALE CDR. It trades about 0.06 of its total potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about 0.09 per unit of volatility. If you would invest  1,525  in COSTCO WHOLESALE CDR on October 5, 2024 and sell it today you would earn a total of  1,335  from holding COSTCO WHOLESALE CDR or generate 87.54% 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.  COSTCO WHOLESALE CDR

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.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days COSTCO WHOLESALE CDR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wyndham Hotels and COSTCO WHOLESALE

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

The idea behind Wyndham Hotels Resorts and COSTCO WHOLESALE CDR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.