Correlation Between Wyndham Hotels and SHOPRITE HDGS

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

Diversification Opportunities for Wyndham Hotels and SHOPRITE HDGS

0.4

Correlation Coefficient

Wyndham Hotels  SHOPRITE HDGS

Very weak diversification

The 3 months correlation between Wyndham and SHOPRITE is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and SHOPRITE HDGS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHOPRITE HDGS ADR 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 SHOPRITE HDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHOPRITE HDGS ADR has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and SHOPRITE HDGS go up and down completely randomly.

Pair Corralation between Wyndham Hotels and SHOPRITE HDGS

Assuming the 90 days horizon Wyndham Hotels Resorts is expected to under-perform the SHOPRITE HDGS. But the stock apears to be less risky and, when comparing its historical volatility, Wyndham Hotels Resorts is 1.09 times less risky than SHOPRITE HDGS. The stock trades about -0.12 of its potential returns per unit of risk. The SHOPRITE HDGS ADR is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,460  in SHOPRITE HDGS ADR on December 28, 2024 and sell it today you would lose (160.00) from holding SHOPRITE HDGS ADR or give up 10.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Wyndham Hotels Resorts  vs.  SHOPRITE HDGS ADR

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.

SHOPRITE HDGS ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHOPRITE HDGS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Wyndham Hotels and SHOPRITE HDGS

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

The idea behind Wyndham Hotels Resorts and SHOPRITE HDGS ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.