Correlation Between National Retail and Wyndham Hotels

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

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

Diversification Opportunities for National Retail and Wyndham Hotels

-0.73

Correlation Coefficient

National Retail  Wyndham Hotels

Pay attention - limited upside

The 3 months correlation between National and Wyndham is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties 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 National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Wyndham Hotels go up and down completely randomly.

Pair Corralation between National Retail and Wyndham Hotels

Assuming the 90 days trading horizon National Retail is expected to generate 5.64 times less return on investment than Wyndham Hotels. But when comparing it to its historical volatility, National Retail Properties is 1.38 times less risky than Wyndham Hotels. It trades about 0.02 of its potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,203  in Wyndham Hotels Resorts on October 5, 2024 and sell it today you would earn a total of  2,447  from holding Wyndham Hotels Resorts or generate 33.97% return on investment over 90 days.

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

National Retail Properties  vs.  Wyndham Hotels Resorts

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Wyndham Hotels Resorts

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Wyndham Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Wyndham Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Retail and Wyndham Hotels

The main advantage of trading using opposite National Retail and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.