Correlation Between Wyndham Hotels and Sabra Health

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

Diversification Opportunities for Wyndham Hotels and Sabra Health

0.36

Correlation Coefficient

Wyndham Hotels  Sabra Health

Weak diversification

The 3 months correlation between Wyndham and Sabra is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Wyndham Hotels Resorts and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care 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 Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of Wyndham Hotels i.e., Wyndham Hotels and Sabra Health go up and down completely randomly.

Pair Corralation between Wyndham Hotels and Sabra Health

Assuming the 90 days horizon Wyndham Hotels is expected to generate 1.12 times less return on investment than Sabra Health. In addition to that, Wyndham Hotels is 1.12 times more volatile than Sabra Health Care. It trades about 0.08 of its total potential returns per unit of risk. Sabra Health Care is currently generating about 0.1 per unit of volatility. If you would invest  1,160  in Sabra Health Care on October 7, 2024 and sell it today you would earn a total of  480.00  from holding Sabra Health Care or generate 41.38% return on investment over 90 days.

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

Wyndham Hotels Resorts  vs.  Sabra Health Care

Wyndham Hotels Resorts

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 19 (%) 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.

Sabra Health Care

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sabra Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wyndham Hotels and Sabra Health

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

The idea behind Wyndham Hotels Resorts and Sabra Health Care 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.