Correlation Between Wyndham Hotels and Moodys

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

Diversification Opportunities for Wyndham Hotels and Moodys

0.91

Correlation Coefficient

Wyndham Hotels  Moodys

Almost no diversification

The 3 months correlation between Wyndham and Moodys is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Moodys go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Moodys

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to under-perform the Moodys. But the stock apears to be less risky and, when comparing its historical volatility, Wyndham Hotels Resorts is 1.1 times less risky than Moodys. The stock trades about -0.12 of its potential returns per unit of risk. The Moodys is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  45,314  in Moodys on December 29, 2024 and sell it today you would lose (1,584) from holding Moodys or give up 3.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Wyndham Hotels Resorts  vs.  Moodys

Wyndham Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wyndham Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Moodys

Risk-Adjusted Performance

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Moodys is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wyndham Hotels and Moodys

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

The idea behind Wyndham Hotels Resorts and Moodys 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.