Correlation Between CAP LEASE and Wyndham Hotels

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

By analyzing existing cross correlation between CAP LEASE AVIATION and Wyndham Hotels Resorts, you can compare the effects of market volatilities on CAP LEASE and Wyndham Hotels 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 CAP LEASE with a short position of Wyndham Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and Wyndham Hotels.

Diversification Opportunities for CAP LEASE and Wyndham Hotels

-0.87

Correlation Coefficient

CAP LEASE  Wyndham Hotels

Pay attention - limited upside

The 3 months correlation between CAP and Wyndham is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and Wyndham Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wyndham Hotels Resorts and CAP LEASE 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 CAP LEASE AVIATION are associated (or correlated) with Wyndham Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wyndham Hotels Resorts has no effect on the direction of CAP LEASE i.e., CAP LEASE and Wyndham Hotels go up and down completely randomly.

Pair Corralation between CAP LEASE and Wyndham Hotels

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the Wyndham Hotels. In addition to that, CAP LEASE is 1.32 times more volatile than Wyndham Hotels Resorts. It trades about -0.21 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.2 per unit of volatility. If you would invest  7,807  in Wyndham Hotels Resorts on September 3, 2024 and sell it today you would earn a total of  1,979  from holding Wyndham Hotels Resorts or generate 25.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CAP LEASE AVIATION  vs.  Wyndham Hotels Resorts

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Wyndham Hotels Resorts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wyndham Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAP LEASE and Wyndham Hotels

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

The idea behind CAP LEASE AVIATION and Wyndham Hotels Resorts 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.