Correlation Between Expedia and Wyndham Hotels

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

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

Diversification Opportunities for Expedia and Wyndham Hotels

0.95

Correlation Coefficient

Expedia  Wyndham Hotels

Almost no diversification

The 3 months correlation between Expedia and Wyndham is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group 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 Expedia 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 Expedia Group 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 Expedia i.e., Expedia and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Expedia and Wyndham Hotels

Given the investment horizon of 90 days Expedia Group is expected to under-perform the Wyndham Hotels. In addition to that, Expedia is 1.01 times more volatile than Wyndham Hotels Resorts. It trades about -0.08 of its total potential returns per unit of risk. Wyndham Hotels Resorts is currently generating about -0.01 per unit of volatility. If you would invest  10,151  in Wyndham Hotels Resorts on October 6, 2024 and sell it today you would lose (62.00) from holding Wyndham Hotels Resorts or give up 0.61% of portfolio value over 90 days.

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

Expedia Group  vs.  Wyndham Hotels Resorts

Expedia Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Expedia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Wyndham Hotels Resorts

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wyndham Hotels Resorts are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, Wyndham Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Expedia and Wyndham Hotels

The main advantage of trading using opposite Expedia and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia 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 Expedia Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.