Correlation Between American Express and WYNDHAM

Can any of the company-specific risk be diversified away by investing in both American Express and WYNDHAM 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 American Express and WYNDHAM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and WYNDHAM DESTINATIONS INC, you can compare the effects of market volatilities on American Express and WYNDHAM 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 American Express with a short position of WYNDHAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and WYNDHAM.

Diversification Opportunities for American Express and WYNDHAM

0.23

Correlation Coefficient

American Express  WYNDHAM

Modest diversification

The 3 months correlation between American and WYNDHAM is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding American Express and WYNDHAM DESTINATIONS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WYNDHAM DESTINATIONS INC and American Express 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 American Express are associated (or correlated) with WYNDHAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WYNDHAM DESTINATIONS INC has no effect on the direction of American Express i.e., American Express and WYNDHAM go up and down completely randomly.

Pair Corralation between American Express and WYNDHAM

Considering the 90-day investment horizon American Express is expected to under-perform the WYNDHAM. In addition to that, American Express is 3.6 times more volatile than WYNDHAM DESTINATIONS INC. It trades about -0.07 of its total potential returns per unit of risk. WYNDHAM DESTINATIONS INC is currently generating about 0.06 per unit of volatility. If you would invest  10,084  in WYNDHAM DESTINATIONS INC on December 26, 2024 and sell it today you would earn a total of  156.00  from holding WYNDHAM DESTINATIONS INC or generate 1.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

American Express  vs.  WYNDHAM DESTINATIONS INC

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

WYNDHAM DESTINATIONS INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WYNDHAM DESTINATIONS INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, WYNDHAM is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and WYNDHAM

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

The idea behind American Express and WYNDHAM DESTINATIONS INC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..