Correlation Between Fevertree Drinks and Wyndham Hotels

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

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

Diversification Opportunities for Fevertree Drinks and Wyndham Hotels

-0.83

Correlation Coefficient

Fevertree Drinks  Wyndham Hotels

Pay attention - limited upside

The 3 months correlation between Fevertree and Wyndham is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc 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 Fevertree Drinks 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 Fevertree Drinks Plc 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 Fevertree Drinks i.e., Fevertree Drinks and Wyndham Hotels go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Wyndham Hotels

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the Wyndham Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 1.08 times less risky than Wyndham Hotels. The stock trades about -0.07 of its potential returns per unit of risk. The Wyndham Hotels Resorts is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  7,831  in Wyndham Hotels Resorts on September 15, 2024 and sell it today you would earn a total of  2,512  from holding Wyndham Hotels Resorts or generate 32.08% return on investment over 90 days.

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

Fevertree Drinks Plc  vs.  Wyndham Hotels Resorts

Fevertree Drinks Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fevertree Drinks Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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

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. 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 Fevertree Drinks and Wyndham Hotels

The main advantage of trading using opposite Fevertree Drinks and Wyndham Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks 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 Fevertree Drinks Plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.