Correlation Between Wyndham Hotels and Hilton Worldwide

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

Diversification Opportunities for Wyndham Hotels and Hilton Worldwide

0.93

Correlation Coefficient

Wyndham Hotels  Hilton Worldwide

Almost no diversification

The 3 months correlation between Wyndham and Hilton is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Hilton Worldwide Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Worldwide Holdings 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 Hilton Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Worldwide Holdings has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Hilton Worldwide go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Hilton Worldwide

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to generate 1.57 times more return on investment than Hilton Worldwide. However, Wyndham Hotels is 1.57 times more volatile than Hilton Worldwide Holdings. It trades about 0.29 of its potential returns per unit of risk. Hilton Worldwide Holdings is currently generating about 0.29 per unit of risk. If you would invest  6,962  in Wyndham Hotels Resorts on September 12, 2024 and sell it today you would earn a total of  2,938  from holding Wyndham Hotels Resorts or generate 42.2% 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.  Hilton Worldwide Holdings

Wyndham Hotels Resorts

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 22 (%) 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.

Hilton Worldwide Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hilton Worldwide reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wyndham Hotels and Hilton Worldwide

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

The idea behind Wyndham Hotels Resorts and Hilton Worldwide Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.